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Dispatches from Japan
Spotlight on 2007
Economic and Corporate Coverage
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Dear Reader,
The yen is rising; the population is aging; consumption is sluggish; Yasuo Fukuda rises to power. Japan’s economic, corporate and political backdrop this year
provided The Wall Street Journal’s Tokyo Bureau with the opportunity to paint
you a complex and compelling portrait of a nation grappling with change. We
are happy to pull together the best of what we offer readers throughout the
world: thoughtful, analytical journalism that breaks news and delves deep to
explain what’s at stake. At the center of our political and economic coverage
stand deputy bureau chief Sebastian Moffett and correspondent Yuka Hayashi.
In this package you can follow them as they explore the economic challenges
facing Prime Minister Fukuda; the global impact of the yen “carry trade”; and
how Japan is starting to warm up to the idea of importing foreign workers.
Strong corporate coverage always starts by getting deep inside a company.
Journal reporters gain the access to industry titans that provide the insights
readers can rely on. In their interviews with Sony’s Howard Stinger and other
Sony executives, reporters Yukari Iwatani Kane and Phred Dvorak revealed a
man caught between two worlds and the management issues at stake. Keep
reading and reporters Andrew Morse and Amy Chozick will help you to better
understand the dynamic market forces driving Citigroup into Japan; driving Nissan to build smaller, cheaper cars; and driving Sanyo away from family control.
We’ve also included a few installments of our popular series on Managing in
Asia. These interview sessions present valuable advice and revealing insights
from Japanese entrepreneurs and corporate leaders. Who knew that the seeds
of Shintaro Tsuji’s success in founding giftware giant Sanrio can be traced back
to his experiences in kindergarten? And if you’re fond of the classic offbeat
Journal feature story, don’t miss our take on driving oversized Hummer vehicles
down Tokyo’s narrow streets and the tale of young novelists practicing their craft
entirely on cellphones. We’re pleased to have the opportunity to collect this
work in one place to show the sweep and import of Japan’s story. As the world
seems transfixed with the developing regional giants China and India, it is well
worthwhile to concentrate on the world’s second-largest economy.
Regards,
Christine Glancey, Managing Editor, The Wall Street Journal Asia
Yumiko Ono, Tokyo/Seoul Bureau Chief, The Wall Street Journal
TABLE OF CONTENTS
Japan’s Economy
Interviews
Corporate News
On a Lighter Note
02 - 21
24 - 29
30 - 43
45 - 48
Understand more about business
II, after he triggered outacross Asia by saying there
no proof women were cod into prostitution. Page 9
Traditionally, currency speculaof dollars a day, according to some
114
tion was the domain of big-money
estimates.
Japan’s Economy
Feb.
March
Jan.
professional investors or global
J.P. Morgan strategist Mr.
Source: WSJ Market Data Group
corporations engaged in export
Sasaki estimates that in the
and import businesses, as well as
months leading up to last week’s
inese lawmakers introhedge funds, which are investment
sharp movements, Japanese indid a law to protect private
pools catering to the rich. Among gained 3.5% against the dollar.
viduals some days held foreign curerty and one to end blan“Japanese individuals are doing rency valued at more than five trilthem the strategy of borrowing in
ax breaks for foreigners.
yen to invest in another country is essentially the same thing as hedge lion yen, or $43 billion. That is simipossible sign of the propwidely practiced and has become funds,” says Tohru Sasaki, chief for- lar to his estimate for the amount
legislation’s sensitivity, an
By Yuka Hayashi
- 9 March 2007
known as the carry trade. It can be eign-exchange strategist at J.P.
Please turn to page 2
ential magazine
that cova lucrative way to cash in on Jait was pulled. Pages 1, 2
pan’s super-low interest rates.
pan and North Korea conNow people such as Naomi Kashed talks on normalizing ties,
iwazaki, 29
each blaming
the other
TOKYO–There
doing essentially
the same thing as hedge
desperate to earn better returns on their
years
old,
a lack of agreement.
Also,
is an aggressive
funds,”
says Tohru Sasaki, chief foreignsavings amid historically low interest
have
joined
North accused
Tokyo
innew type
of of
trader
exchange
strategist at J.P. Morgan Chase
rates. The Japanese central bank’s shortthe
fray. She
fying its suppression
of Kopushing around
Bankcurrenin Tokyo. “Together they are acting
term interest rate was zero for five years
trades
s who support
Pyongyang.
the yen
on global
likefrom
an enormous
hedge fund.”
until last July, and at 0.5% now it comcies
her
currency markets:
pares with 5.25% in the U.S. The result:
e U.N.’s watchdog
agency
small apartJapanese individuA combination
of technology,
Japanese
significantly
oved the suspension
of 22
A landmarkderegulaproposal to protect
ageinvestors
firm andcan
on earn
the piece
of propment
in Toear technical
als.aid projects to
tionsuburbs.
and low interest
rates
is enabling
on alegislation,
dollar-denominated
erty-rights
which has
private
property
was formallyhigher
in- returns
kyo’s
as part of sanctions, but
individual
Japanese
to useinto
the China’s
same kind
bank deposit
its yen equivalent.
drawn than
vocalon
criticism.
troduced
legislature
She
started
an said that
wouldn’t stop
A revised edition of the biweekly,
Traditionally,
curof investment
as the pros.
amid continuing
controversy, and
about
a year techniques
om enriching
uranium.
normally
distributed
and
a half ago
in one
possible
sign ofhas
the legislarency
speculation
Borrowing
money
to trade
currencies
It isn’t which
entirelyisnew
for Japanese
house-on
is to
hit newsstands
tobecome
suppletion’s
latest issue
of toMondays,
was
the domain
so popular
insensitivity,
Japan thatthe
individholds
keep some
of their
savings in FriS. Democrats unveiled
leg-of
according
to the
person. of
Thursment
the in--- sitting
an influential
Chinese business
big-money
profesual traders
at their computers
foreignday,
currency
to take
advantage
dision requiring
the pullout
of
Naomi
day evening,
Caijing’s
Web
site discome
from
covered
sional
investors
in homes
acrossmagazine
the countrythat
-- now
trade it was
crepancies
like these.
What has
changed
ps from Iraq
by late
2008,
Kashiwazaki
played an
issue
dated this week
with
her
online
global corporatens of
billions of dollars a day, according
is that people
have
increasingly
engaged
e the U.S. or
commander
said
abouttrading
the Chinese
store,
which
By Andrew Batson in Beijing in whataiscover
rgents havetions
sought
to intenengaged
in
to some
estimates.
knownstory
as margin
-market’s
ups-and
and a
sells designer athletic shoes that
and Geoffrey A. Fowler and tradingstock
attacks amid
a crackdown.
export
and import
borrowed
money
indowns
an effort
table
ofreturns.
contentsBecause
that doesn’t
menare hard
to find
in Japan.
In
recent strategist
Juying
Qin
in Hong
Kong
businesses,
as
well
as
hedge
funds,
which
J.P.
Morgan
Mr.
Sasaki
estito
boost
their
Japanese
e U.S. said it is optimistic
tion
the
articles
about
the
property
months,
she
has
earned
an
average
to the rich.
mates that in the months leading up to
interest rates are so low, they can borrow
ut a trade are
pactinvestment
with Southpools catering
pulled earlier this week.
or the brokerage
firm.
profit
of $8,600ina month.
Among
themover
the strategy
of borrowing
last week’s sharp
movements, Japanese
money legislation
against a deposit
to trade, say,
20
a, but added
a dispute
“I
must
say,
I
am
addicted
to
this
Hu
Shuli,
Caijing’s
editor,
It
wasn’t
immediately
clear
who
to remains
invest in aanother country is widely
individuals some days held foreign curtimes as much.
orts of U.S.yen
beef
now,” she says.
the
of Caijing—a wasn’t available to comment. A
practicedPage
and has
known as the
rency valued at blocked
more than
fiveissue
trillion
ntial deal-breaker.
9 become Tens
of thousands of other in- move that came during one of the phone call to China’s press regulacarry trade. It can be a lucrative way to
yen, or $43 billion. That is similar to
In 2005, financial-industry deregulation
iwan indicted a fugitive
vestors like her are doing the same busiest periods in China’s political tor, the General Administration of
his estimate for the amount of yen loans
made currency trading with borrowed
cash inwith
on Japan’s
super-low
interest
nessman, along
his
thing. With Japanese interest rates calendar—or why. But according to Press and Publication, wasn’t antaken
out
by
professional
investors
in
money swered
accessible
to ordinary
investors.
rates.
and children, on charges of
Thursday
evening.
hovering at a low 0.5%, they bor- a person familiar with the situaorder to and
speculate
in the
foreign
currencies.
Instead ofIn
banks,
which charge
fees,
ezzling up to $1.8 billion
row big piles of yen cheaply
the months
leadinghigh
up to
the
tion,
issue
included articles,
traders
increasingly
use
low-cost
onlineNow
people
such as Naomi
Kashiwazaki,
m Rebar Asia
Pacific
Group.
then invest it in currencies else- among others, on the bankruptcy annual session of the National PeoThe returns.
strategy, which
essentially involves brokertrading services.
More
than
29 years old, have joinedwhere,
the fray.
She for higher
looking
of a government-controlled
Please
turn
to 100
pagesuch
2
he wheels trades
broke currencies
off an In- from her small
selling
yen
and buying other currencies,
companies were set up after the dereguapart- makes
Ms.
Kashiwazaki
trades
tosian jetliner as it landed, an
lation in 2005.
ment in Tokyo’s suburbs.
She $200,000
started or so ahas
taling
daygained
amongpopularity during the past
stigator said. At least four
year
or
so,
as
the
yen
weakened.
Countabout
a
year
and
a
half
ago
to
suppleseveral
currencies,
ranging
from
ralians were among the 21
less individual
investors piled into investTokyo-based Money Partners Co., an onment the
income from her
store,to the Swiss
theonline
U.S. dollar
franc.
d in Wednesday’s
crash.
ments
to profit from its decline.
line-trading company, has gathered more
which sells designer athletic
that
Asshoes
the yen
gyrated over
thedesigned
past
n Australian
suspect
That are
selling
than 22,000 customer accounts since it
areterror
hard to
find in Japan.
In recent
week,
traders such as these
be- helped further push down
appear before
a U.S.
yen: role
Between last May and Jan. 29
was founded in 2005.
months,
shemilihas earnedlieved
an average
profit
to have
played athe
major
commission
March a20,
in the volatility. Last week,
yenrecent low point -- the Japa-- itsthe
most
of $8,600
month.
five years after he was imnese currency weakened 11% against the
“Our typical investors are in their 30s or
oned at Guantanamo Bay.
U.S. dollar. When the market recently
40s,” says Money Partners President
“I must say, I am addicted to this now,”
Advertising
ngladeshishe
security
changed directions, many Japanese
Taizen Okuyama. “They come
says. forces
sted ex-Prime Minister Zia’s
individuals apparently reversed their
home from work and sit
over corruption
investment strategies quickly, at least for
in front of their
Tens ofallegations.
thousands of other investors
the short term, boosting that rebound.
computers
like her are doing the same thing. With
Indonesia’s
rare
problem:
for a
Japanese interest rates hovering at a
ads
At midmorning
Thursday in New York,
low 0.5%, they borrow bigHow
piles to
of make
yen cigarette
don’s rankscheaply
of the ultrarich
the yen was trading at 117.16 to the dollar,
and then invest itstand
in currencies
out > Page 26
expanding elsewhere,
at an unprecea strengthening of about 4% since its
looking for higher returns.
ed rate. Page
Jan. 29 low.
Ms. 20
Kashiwazaki makes trades totaling
$200,000 or so a day among several currencies, ranging from the U.S. dollar to
The activity is driven
itorial&Opinion
the Swiss franc.
by Japanese
investors
other dead
journalist
the all
yenover
gyrated over the past week,
he bad oldAsdays
traders
such as these are believed to have
n in Vladimir
Putin’s
played a major role in the volatility.
ia. Page 12
Last week, the yen gained 3.5%
against the dollar.
Speculation in yen lures small investors in Japan
Currency trading by individuals adds to market swings
China magazine is pulled
as property law looms
Smoking’s nirvana
“Japanese
individuals
are
XXXI NO. 131
F R I D AY - S U N D AY, M
on tax break
nese households to keep some of cally by automatically selling off
Continued from first page
of yen loans taken out by profes- their savings in foreign Japan’s
currency to
and closing down a client’s investEconomy
sional investors in order to specu- take advantage of discrepancies ment if it threatens to spiral out of
late in foreign currencies.
like these. What has changed is control and cause losses that
The strategy, which essentially that people have increasingly en- would devour the collateral on deinvolves selling yen and buying gaged in what is known as margin posit.
WEEKEND
JOURNAL
W10
other currencies,
has gained
popu- | PAGE
trading—trading
borrowed
That happened to many invesof hours
to
quantities
foreigntocurrency
with
a violent
laritycouple
during
the past
money—in
anofeffort
tors in
the borpast week,“I
aslove
the yen
be- market like this,” Mr.
before
going
rowed
yenreturns.
were forced
sell rising
off their
year trade
or so,
as the
yen
boost
their
Be- to gan
against theMatsui
dollar. says.
Inves-“My hope is to accumulate
to bed.”Countless inremaining
foreign
currency
to who
pay back
money so I can stop trading by the
weakened.
cause
Japanese
interest
tors
had boughtenough
large quantithese
type ofcurrency
end of
theboryear.”
dividual investors piled
rates
are loans.
so low,Analysts
they canbelieve
ties this
of foreign
with
Takashima,
selling,
alongagainst
with selling
by hedge
into Osamu
investments
deborrow
money
a rowed
yenfunds
were forced to sell off ASSOCIATED PRESS
BEIJING—Chinese lawmakers
chief
currency
and other
institutional
pushed foreign currency
IN its
ASIA | PAGE 17
signed
to HEARD
profit from
deposit
to trade,
say, 20 players,
their remaining
Morgan Ch
decline.
times
as much.
to pay
analyst at the Bank
up the
yen against the dollar
andback
otherthese loans. Analysts formally introduced a hotly debated
gether the
Dollar
vs.
yen
That
selling helped
In
2005, financial-inbelievetrading
this type of selling, along law to protect private property and
of Tokyo-Mitsubicurrencies.
At Money Partners,
mous hedg
a
law
to
end
nearly
three
decades
of
further
push
down
the
dustry
deregulation
with
selling
by
hedge
funds
and
How
many
yen
one
dollar
buys,
shi UFJ, estimates
volume in the past week has been more
Ainvescomb
blanket
tax
breaks
for
foreign
yen: foreign-currency
Between last May
made
trading
pushed
data
thancurrency
triple normal
levels.other institutional players,daily
regulation
and Jan.
29—its
with borrowed money ac- up the yen against the dollar and tors in a step that will raise the tax
holdings
by most
Japa-reenabling i
¥122
burden
for
many
companies.
cent nese
low point—the
Japacessible
to ordinary
in- other
currencies. At Money Partindividuals
Nao Matsui,
a day trader
in Yokohama,
the sa
The long-discussed use
proposed
neseengaged
currencyinweakened
vestors.
of
margin
has beenInstead
trading
currencies
online since
By Yuka
Hayashi
techniques
120
property
law
marks
one
of
the
11% against
the
U.S.
dolbanks,
which
charge
high
trading are be2005,7after he was forced to close his Into t
most explicit attempts money
to legally
Nao
Matsui
lar. When
the
market
refees,
traders
increasfive
trillion Japan’s Abe said ruling party
ternet-advertising
business. Online
trada’s stuntedtween
capital
markets
TOKYO—There
is an aggressive
so po
protect private wealth bycome
a governcently
changed
direcingly
use
low-cost
online118
and
trillion yen. lawmakers will conduct a ing
him type
recently
to nearly
pay off
newenabled new
olding back
the10country’s
of trader
pushing
around
vidual ago
tra
ment that only a generation
tions,The
many
Japanese
individuals trading services.
than 100
totaland
amount
a $2.5More
million
was left
with marinvestigation into the military’s
omic development
unthedebt
yenthat
on he
global
currency
computers
preached communist egalitarianapparently reversed their invest- such companies were set up after
116
use of brothels
during World
of deposits
kept in individuals’
marginfrom the business.
His mostindividuals.
recent stratining financial
stability,
kets: Japanese
country—n
ism and that still routinely
inserts
ment strategies quickly, at least for the deregulation in 2005.
War
II,
after
he
triggered
outTreasury chief
Paulson
said. has more than doubled
trading
accounts
egy: betting against
the British
pound.speculaTraditionally,
currency
ofThe
dollars
itself
into
economic
life.
pro-a
the short term, boosting
that
reTokyo-based
Money
Partners
114
rage across Asia by saying there
nwhile, China’s
central-bank
tion was the domain of big-money
in the
past two years.
estimates.
posed
tax
law
would
unify
the
tax
bound.
Co.,
an
online-trading
company,
Feb.
March
Jan.
was noisproof
women wereIncoGovernor Wu
Xiaoling
said
professional
investors or global
J.P. M
borrowed
money
order
to22,000
maximize
rate for foreign-financed compahasrisky
gathered
more
than
cus-his return, the 40AtInvesting
midmorning
Thursday
inhighly
erced
into
prostitution.
Page
9
Source: WSJ Market Data Group
is room tobecause
raise banks’
recorporations
engaged in export
Sasaki
es
it can
year-old
pledged
nies with those of Chinese
enterNew York, the
yen dramatically
was trading amplify
at tomer accounts
since
it some
was two million yen
requirement.
Page well
8
import
businesses,
as well as
months le
gains.
Some brokers
al- inintroin collateraland
recently
to take
positions
n Chinese
lawmakers
ners,
trading volume in the past prises at 25%.
founded
2005.
117.16losses
to theas
dollar,as
a strengthening
hedge funds,
which
are investment
sharp
mov
low individuals
borrow
100
times
the
valued
at 1 million
duced
a law
to protect
private
Both laws, which were
introweekmillion).
has been more than triple norabout
4%
since itstoJan.
29 low.
“Our typical
investors
are GBP
in ($1.9
e yenoftumbled
against
the dollar. are expected
pools period
catering
to the rich. Among gained 3.5% against
viduals som
amount
of money
they
astheir
collatOversays
a three-day
he
property
one to
blanduced Thursday,
to
malaccumulevels.
30send
or 40s,”
Money PartThe
activity
is driven
bydeposit
Japa-and
ollar Thursday
morning
“Japanese individuals are doing rency valu
them
the strategy
of borrowing in
ket
breaks
for foreigners.
eral.
Online-trading
companies
normally
lated
a profit
of some
nine million
Nao Matsui, a day trader in pass.
ners
President
Taizen
Okuyama.
nesedriven
investors
desperate
totax
earn
ew York,
by market
yen
to invest
in another country is essentially the same
thing as hedge
lionthe
yen,
or
Infrom
a possible
sign ofcome
the proptryinterest
to protect
clients
losing too
yen.
it takes
Introducing
the bill to
na“They
homeUsually,
from work
andhimYokohama, has been trading curbetter
returns
their
savings
of renewed
inon
yen
widely
practiced and has become funds,” says Tohru
Sasaki,
chief forlar
to his e
erty
legislation’s
sensitivity,
an
tional
legislature,
Vice
Chairman
much
money,
typically
by
automatically
a
month
to
earn
that
rencies
online
since
2005,
after
he
sit
in
front
of
their
computers
for
a
amid
historically
low
interest
y trades. Pages 1, 22
known as the carry trade. It can be eign-exchange
strategist
at aJ.P.
influential
magazine
covWang
Zhaoguo,
member of Plea
the
off and closing
down
a client’s
amount.
couple ofthat
hours
to trade before go- was forced to close his Internet-adrates.selling
The Japanese
central
bank’s
a lucrative way to cash in on Japulled.
thay Pacific
CEOinterest
Chen
investment
if itisthreatens
towas
spiral
outto Pages
vertising business. Online trading Communist Party’s powerful Politing
bed.” 1, 2
short-term
rateered
was itzero
pan’s super-low interest rates.
ning to
China
inof the
control
and
cause
Osamu
Takashima,
chief cur- enabled him recently to nearly pay buro, said the country’s economic
forrun
five
years
until
last
July,
andthat
at
nlosses
Japan
andwould
North
Korea
conNow people such as Naomi Kashment strategy
of
Swire
Parency
analyst at
the Bank of Tokyo- off a $2.5 million debt that he was and social changes made the law
0.5%devour
now it compares
with
5.25%
in on
the collateral
on
deposit.
cluded
talks
normalizing
ties,
iwazaki, 29
which
holds
a 40%
stake
left with from the business. His necessary.
Mitsubishi
UFJ,
estimates
foreignthe
U.S. The
result:
Japanese
inveswith each blaming the other
years
old,
e airline.
Pages
3,
5
“As the reform and opening up
strategy: betting
currency
holdings
tors That
can earn
significantly
for higher
ainvestors
lack of agreement.
Also, by Japanese in- most recent
happened
to many
in
have joined
of
the
economy develop, people’s
against
the
British
pound.
dividuals
engaged
in
margin
tradreturns
on
a
dollar-denominated
the
North
accused
Tokyo
of
inpast
week, as the yen began
is scaling the
back
its conthe fray. She
In order to maximize his return, living standards have improved in
are between
five trillion and 10
tensifying
suppression
of Kobankbusiness
deposit
than
on
itsdollar.
yen
equiva-its ing
rising
against
the
r-finance
in
Japan,
trades currentrillionPyongyang.
yen. The total amount of de- the 40-year-old pledged some two general and they urgently require
whoinhad reans who support
e wakelent.
of aInvestors
law capping
cies from her
million
yen in collateral recently to effective protection of their own
posits
kept
in
individuals’
marginisn’t Page
entirely
Japabought
large
t rates onItloans.
3 new nfor
The
U.N.’s watchdog agency
small apartlawful property accumulated
take
positions
valued at £1 million
trading
accounts
has
more
than
approved the suspension of 22
A landmark
proposal
towork,”
protectMr. Wang
age firm
ment in Tothrough
hard
saida
. stocks were up solidly
($1.9
million).
Over
a
three-day
pedoubled
in
the
past
two
years.
nuclear technical aid projects to
erty-rights
was formally
inkyo’s suburbs. private property
in
a
speech
to
2,835
deputies
of
the
afternoon Thursday. Toprofit of
Investing but
borrowed money is riod he accumulated a troduced
Iran as part of sanctions,
into China’s legislature drawn voc
She started
Nikkei average jumped 1.9%
some
nine
million
yen.
Usually,
it
highly
risky
because
it
can
dramatiTehran said that wouldn’t stop
A revise
about a year amid continuing controversy, and
090.31. Page 22
callyuranium.
amplify losses as well as takes him a month to earn that
it from enriching
and a half ago in one possible sign of the legisla- which is n
gains. Some brokers allow individu- amount.
e European Central Bank
to
supple- tion’s sensitivity, the latest issue of Mondays, i
Democrats
unveiled
leg-100 times the
Eurotunnel SA postednanU.S.
operat“I love a violent market like
als to
borrow
ment the in- an influential Chinese business day, accord
d its key
rate
a
quarter
islation
requiring
the
pullout
of
ing profit of £225 million ($435 mil- amount of money they deposit
as this,” Mr. Matsui says. “My hope is
Naomi
come from magazine that covered it was day evenin
to 3.75%.
from Iraq
by lateOnline-trading
2008,
lion)The
for Bank
2006.ofAEngGlobaltroops
Business
collateral.
compato accumulate enough money so I
Kashiwazaki
played an is
her
online
kept rates
steady.
Page
11
while
commander
said
Continued from first page
Brief Thursday incorrectly
saidthe
theU.S.nies
normally try to protect clients can stop trading by the end of the
a cover st
store, which
e Fed’s
fixation
on
inflation
By
Andrew
Batson
in
Beijing
insurgents
have
sought
to
intenple’s Congress, which opened this
operating profit was £225.
from losing too much money, typi- year.”
stock mark
sells designer athletic shoes that
ctations is misplaced and
and Geoffrey
A. Fowler
and
sify attacks amid a crackdown.
week,
the government
has been
table of co
are hard to find in Japan. In recent
ead to complacency, a priJuying Qin carefully
in Hong Kong
managing
public
discusn The U.S. said it is optimistic
tion the ar
months, she has earned an average
sector study warns. Page 11
sion of the proposed propertyabout a trade pact with South
pulled earlier this week.
legislation
profit of $8,600 a month.
rights law, which would give priKorea, but added a dispute over
e Bank of Korea kept its
“I must say, I am addicted to this
Sh
It wasn’t immediately
clear
who
vate property the same legal Hu
protecimports of U.S. beef remains a
ate target unchanged at
now,”
she says.
wasn’t
av
blocked
the tions
issueasofstate
Caijing—a
This
index
of
businesses
mentioned
in
today’s
issue
of
The
Wall
Street
Journal
Asia
is
intended
to
include
all
significant
references
to
compaproperty.
Critics
of
potential
deal-breaker.
Page
9
and will likely stand pat
phone call
Tens of
thousands
of and
other
one of
the academics
FirstPage
reference
appear in boldface type in all articles except
those
on page one
the ineditorialmove
pages.that came
the during
law, mainly
Marxist
e nearnies.
term.
11 to these companies
n Taiwan indicted a fugitive
tor,
theit Ge
vestors like her are doing the same busiest periods
in
China’s
political
and retired officials, argue
that
is
and
thing. With Japanese interest rates calendar—or incompatible
why. But according
to Press
. retailers’ same-store sales businessman, along with his
with
China’s
socialist
Cambridge
Place
Djarum
.
.
.
.
.
.
.
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.
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.
26
Accredited Home Lenders
.
21
Industrial
&
Commercial
Pusan
Bank
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
wife and children, on charges of
Th
hovering at a low 0.5%, they bor- a person familiar
withThey
the fear
situa1.9% in February.
Some
ideology.
that itswered
could enQuestand
Software .................7
Investment
Management
Holding ........................20
Bank
of China
..17,21,22
Dowbillion
Jones .....................row
....2 big
embezzling
up to $1.8
piles
of .yen
cheaply
In the
tion, the issue
included
articles,
s expect
warmer
trench
inequalities
of wealth
andm
...................................20 Electronic Arts ............18,28 Inpex Holdings ................22 Rashid Hussain .................6
Activision
........weather
...............28
from Rebar Asia Pacific Group.
investAirways
it in
else- Group
annual ses
among
on the bankruptcy
ft spring
.........others,
...7
.....currencies
.............7 Rolls-Royce
Aegonsales.
NV .....Page
...........5
....7,22 Carrefour .....................6,22 EON Capital .................then
....6 JetBlue
encourage
the privatization
of
where,
looking
for
higher
returns.
a government-controlled
brokerS.A.C.
Capital of
Management
Plea
Kleiner
Perkins
Caufield
&
Allianz ............................18 Cathay
Pacific
Airways
Essar
Group
.
.
.
.
.
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3
n The wheels broke off an Instate
enterprises.
watchdog
......to..............................18
Byers................makes
............14trades
........3,5,22
....................jetliner
Altria group
Group....filed
..26
...........a
....peti..................Ms.
....2 Kashiwazaki
donesian
as itEurotunnel
landed, ..an
As Wang Zhaoguo, vice chair...............................22
...............or
......so
......a
...15
againstAnglo
Hutchison’s
Irish Bank ...sale
.........of
.22 Chenery Associates .........15 Exxon Mobil ...................taling
....6 KPMG
$200,000
day Saks
among
investigator
said.
At
least
four
man
of the standing committee of
ScanScout
.
.
.
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27
Kuwait
Finance
House
.
.
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.
6
China
Life
Insurance
.
.
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.
22
AT&T
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27
ake in an Indian wireless
Federated Department several currencies, ranging from
Australians were among
the
the National People’s Congress, inLG Electronics .................28 Second Curve Capital .....20
BankPage
of China
......21
Stores
..................the
..22 U.S.
venture.
3 .................17 China National Petroleum
dollar to the Swiss SEEC
franc.
Media Group............2
dead
crash.
............in
......Wednesday’s
.................17 First
Bank of Communications .4
troduced the proposed propertyMarblehead .............20 Lufthansa ..........................7
Shanghai
the yen gyrated
past Feidian
................over
...22 the
............................15 Ford Motor .....................22 AsMamma.com
Bank of Montreal
...........15 Chubb
ama accepted
Malaysian
rights law to the legislature, he
n An Australian terror suspect
Investment
Development
Marathon
Oil
.
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6
week,
traders
such
as
these
are
beBayer
.....22 Citigroup .................3,19,20 Fortis ................................7
..........revised
................bid
on fund
EPF’s
said in a speech that China’s people
....................................21
will
appear
before
a
U.S.
miliMcDonald’s
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
.
.
.
7,22
to have played a major
role
BBN
..........27 Colony Capital ..................6 France Télécom .............lieved
..27
Sidley
Austin ..................15
s stake
in Technologies
Rashid Hussain
“urgently require effective protecMicrosoft
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
7,27,28
tary
commission
March
20,
Bear Stearns ..................10 CompuCredit ...................20 Fremont General ..........in
..22the volatility. Last week, the
yen Exchange .......19 tion of their own lawful property acSingapore
EON’sBerkshire
higher Hathaway
bid. Page
over five ..years
he was
im- Holdings.21 Mizuho Financial Group .19 SoftBank Asian
......6
..17 ConocoPhillips
.............after
...6 Fuxi
Investment
Monsanto ..........................4
cumulated through hard work.” He
Blip Networks .................27 Costco
Wholesale
........22 Gap .....Bay.
prisoned
at....Guantanamo
..............................5
Infrastructure Fund.......19
nk of BMW
Communications
Morgan Stanley ................7
.................................7 D.E. Shaw Valence
emphasized that the draft law
General Atlantic .............19
Sony .........................22,28
myCFO
.
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14
ts netBombay
profitStock
roseExchange
33% last
Advertising
n
Bangladeshi
security
forces
Portfolios .....................18 General Electric .................3
19
SSE Steel .........................7
would strengthen protections for
National
Stock
Exchange
of
driven
the ..Chinese
arrested
BPby
Amoco
....................22 Deutsche
...............15Minister
Bankex-Prime
Swire Pacific...................3,5
GoldmanZia’s
Sachs Group
state property as well. (See article
India
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19
Calcutta lending.
Stock Exchange
194 Deutsche
Börsecorruption
..............19 allegations.
s increased
Page
son over
..............................10,19 NEC ................................19 Take-Two Interactive
on page 2.)
Software
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18
Google ...........................27 Netblue ..........................15
Also introduced at the session
Target
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5
THE WALL STREET JOURNAL ASIA
Indonesia’s
rare
problem:
Groupe Arnault ..................6 New Century Financial ...22
rkets 11 a.m.Dow
ET Jones Publishing Company (Asia)
was a proposed law to set a single,
Gudang Garam ................26 News Corp. ....................27 Tata Steel .........................7
NET
PCT
How to make cigarette ads
25/F, Central Plaza, 18 Harbour Road, Hong Kong
Telefónica ...........Understand
............27
more
aboutforbusiness
25%
tax rate
both foreign-fiT
CLOSE
CHG
CHG
Harris
Associates
.
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19
Nikko
Cordial
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19
Tel 852-2573 7121 www.wsj-asia.com Fax 852-2834 5291
Tokyo Electron ..................4
London’s ranks of the
ultrarich
Hess
.................................6stand
nanced and Chinese companies.
out...>.....Page
17090.31
+325.69 +1.94
Nintendo
..............26
..28 Toshiba ...........................22
SUBSCRIPTIONS
and Address Changes, please
are expanding at an Hindustan
unpreceLever .............22
On the starting grid:
the race to rule Formula 1
Is PetroChina’s stock
starting to lose its sheen?
What’s News—
usiness & Finance
World-Wide
Speculation in yen l
small investors in Ja
Overseas investors
to lose preferences;
wealth is protected
Currency trading
by individuals adds
to market swings
Individual traders
are believed to have
played a big role in
the yen’s volatility.
China magazine i
as property law l
CORRECTIONS &
AMPLIFICATIONS
Magazine issu
INDEX TO BUSINESSES
Smoking’s nirvana
Japan’s Economy
Rising in urban Japan: land prices
Selective recovery in cities reflects shift toward a service economy
By Andrew Morse - 28 March 2007
T H E WA L L ST R E E T J O U R N A L .
7
LEADING THE NEWS
TOKYO–To see why Japanese land prices
have begun to rise for the first time in 16
years, take a look at Tokyo Midtown, a
swank office-and-hotel development in
central Tokyo that is scheduled to open
on Friday.
HO reach Behind the rise in Japan’s land prices
lu samples
Tokyo Midtown
Continued
The $3.4 billion development,
which from first page
anese companies. Many are adding
includes a 54-story glass-and-steel
Going up
to building,
keep their businesses exstructure that is Tokyo’sstaff
tallest
panding.
Rising
prospects
for
emSkyscrapers under construction
has already rented out all its office space,
ployment,
in turn, have prompted
Siti Fadilahdrawing
Supari, on
complained
Japanese companies
lookto start looking for
vaccine companies,
including
ing for bigger
offices to individuals
accommodate
New York City
119
Australian firm CSL Ltd., were homes, pushing up the value of resistaffs that are growing as the economy
g the country’s samples with- dential properties.
improves. Fujifilm Holdings Corp. and
permission. She also said it was
Overall, commercial land
Konami Indonesians
Corp., a videogame
maker, are
Tokyo
92
st that ordinary
prices jumped 2.3% last year,
moving
their
headquarters
to
new
ld likely never be able to afford while the
residential
land prices rose
complex.
Internet
company
Japan
ave access
to those
vaccines
0.1%.Yahoo
Despite
Tokyo’s building
London
68
is renting
additional
space inskyscrapers
the
duced fromCorp.
samples
taken on
In- boom—92
under concomplex
while
maintaining
its
headquaresian soil.
struction, according to German
tersone
in aof
nearby
high-rise.
n Indonesia,
the coundata tracker Emporis GmbH—the
Beijing
52
s hardest hit by the H5N1 virus supply of premium-grade office
looking
placecan’t
that could
in, bird flu“We’d
has sobeen
far killed
63for aspace
keep up with demand
handle
our needs
for several
says
he 81 people
infected
there
fromyears,”
growing
companies. The av- Note: China data may be incomplete
Japan's newest property development,
Kikuchi,
a spokeswoman
Yahoo rate in Tokyo’s Source: Emporis GMBH
sinceAkie
2005,
according
to erage for
vacancy
the Tokyo Midtown complex, at night.
Japan, which
hasconrentedmain
10 floors
in thedistricts was 2.9%
the WHO’s
tally of
business
firmed
cases.
Tokyo
Midtown development.
“Our staffin December
2006, down from
Making
announce-over4.2%
in December
2005 and 6.1%
ing hasthe
quadrupled
the past
three
in the
mentyears.”
late yesterday,
Dr. employs
says Osamu
Kaneko,
presiin December
The company
nearly 2004, according
Osaka andto
Nagoya.
Thecountry—are
value of sometightly conclose toomy,”
advertising
agencies,
accountanis near
shifting
Supari
declined
of KK DaVinci
a realcon-suchnected.
2,300
people.to say Miki Shoji Co., a real-estate
properties,
as a plotJapan
of land
the from
ciesa anddent
investment
banks.Advisors,
The upshot:
manufacturing
economy
ser- prices
how many virus samples sultancy.
estate
company
that
Tadao Ando-designed
Omotesando
Hills to a Land
in investment
Japanese cities
are likely
vicein economy.
Some
companies
have accumulated
in Indo-including
manages
about
billion
in the
JapaThe
land-price gains
were
Upscale boutiques,
an Issey
shopping
complex
a fashionable
Tokyo
to continue
rising,
while$9
they
slip in
are moving
facilinesian
laboratories
since shop,
nese properties. “As far as Tokyo
most
pronounced
Japan’s big jumped
Miyake
Pleats Please
have
scooped in neighborhood,
moremanufacturing
than 45%.
countryside.
tiesproperties
overseas near
to take
advantage of is concerned, I’m very bullish,” he
the country
shar- marquee
cities—Tokyo,
Nagoya.
up the stopped
development’s
retail Osaka and
Heavily
trafficked
major
wages
in places such“Japan
as is
ing samples
with internasays.
“But I’m
very more
optimistic
The
properties,
space. Occupying
the top
ninevalue
floors:of some railroad
stationslower
in Nagoya
in central
changing
intonot
a much
conChina
and India,
or to get closer
to about
tionalTokyo’s
scientists
in Decemthe economy,”
rest of Japan.”
such
as ahotel.
plot of land
near
first
Ritz-Carlton
luxury
Japan
andthe
Hakata
in southern
Japan
centrated
service
says Osamu
customers—Japanese
car
ber. “The discussions Tadao Ando-designed
OmoteFew places
exemplify
ecochalked
up risestheir
of more
than 40%, as
Kaneko,
president
of KK
DaVincithe
Adviwere long and difficult, sando Hills shopping complex in a makers have opened factories nomic transition more completely
Such keen demand for commercial space
did four residential properties in elegant
sors, a real-estate investment company
but the result is satisfac- fashionable Tokyo neighborhood, throughout the U.S.
than Tokyo
project,
in Japan is a big reason that property
Tokyo neighborhoods.
that manages
aboutMidtown.
$9 billionThe
in Japanese
tory,” Dr. Supari said. She jumped more than 45%. Heavily
But those same companies still built on the former site of the Japrices
nationwide
posted
their
first
properties.
“As
far
as
Tokyo
is
concerned,
called the past system of trafficked properties near major
general
rise
in 16 years, railroad
according
to a
Whileinproperty
I’m very bullish,” he says. “But I’m not
ing samples
“more
dangerous
stations in Nagoya
cen- values are rising in major
government
survey
released
last week.
prices in The
rural areas
-- where about
optimistic
aboutdemand
the rest of Japan.”
economic
shiftvery
means
less
for
n the threat
of an H5N1
pantral Japan
and Hakatacities,
in southern
growth
is
half
of
Japan’s
127
million
people
live
-ic itself.” The economy’s continued
Japan chalked up rises of more
leading to
a sixthconconsecutive
year as
of did fourare
still falling, though
slower than
before. outside
Few placesmajor
exemplifycities,
the economic
transibig plots
of land
where
uring the two-day
Jakarta
than 40%,
residential
earnings
increasesthe
for many
Japanese
Commercial
tion more completely than Tokyo Midnce, the WHO
also discussed
properties
in elegant Tokyo
neigh- land prices outside big cities
companies.
Many
are adding
staff to
fell an average offactories
2.8% last year,are
after usually
town.
The project,and
built on
the former site
located,
more
of establishing
a global
stockborhoods.
theirthat
businesses
dropping
5.5% a year earlier. Residential
of the Japan Defense Agency headquarof bird-flukeep
vaccines
devel- expanding.
While Rising
property values
are risprospects
for employment,
prices
last year for
after falling
developed
by Japan’s biggest
demand
officesters,
in was
city
centers.
g countries
would have
access ing in
in turn,
majorhave
cities, prices
indropped
rural 2.7%
prompted
start looking for
year.
real-estate developer, Mitsui Fudosan
a pandemic
broke individuals
out. That toareas—where
about 4.2%
half the
of previous
Jahomes,
pushing from
up the value
residenCo., and five other companies. Almost all
has attracted
attention
pan’sof
127
million people live—are
keepinvestors
their marketing
and finance
ible funders,
the Bill still falling, though slower
pan Defense
Agency
headquartial including
properties.
Seasoned
property
say the two
of the major
tenants are
in service
busithan
in cities
Japan.
elinda Gates Foundation.
was developed
by Japan’s
-- rising functions
prices in the
andThat means
nesses, ters,
including
State Street
Corp., abigbefore. Commercial trends
land prices
demand
gestNikko
real-estate
developer, Mitsui
outside
cities fellslumping
an average
Overall, commercial land
prices big
jumped
pricesless
in the
countryfor
--big
are plots of land
bank, and
Asset Management
Co.,
SJ.com 2.3% last year, while residential
outside
cities,
where factoFudosancompany.
Co., and five
otheraffilicompaof 2.8% land
last year, after
dropping
tightly
connected.
Japanmajor
is shifting
from
a mutual-fund
A clinic
are usually
located, and more
nies.
Almost
all ofUniversity
the major
5.5%
a year earlier. aResidential
prices
rose
Tokyo’s
manufacturingries
economy
to a service
ated with
Johns
Hopkins
is tenalso
Tracking
bird
flu 0.1%. Despite
demand
forare
offices
in city centers
ants
are
in service businesses, inprices
dropped
2.7%
last
year
afbuilding
boom
-92
skyscrapers
under
economy.
Some
companies
moving
located
in
the
complex.
See sortable data and case
that are close
to advertising
agen- cluding State Street Corp., a bank,
ter falling 4.2% the previous
year. facilities
manufacturing
overseas
to take
studies on construction,
deaths world-wideaccording to German data
cies,wages
accountancies
and
invest- and Nikko Asset Management
Seasoned
property
investors
tracker
Emporis
GmbH
-the
supply
of
advantage
of
lower
in
places
such
as
attributed to bird flu, at
ment
The
upshot: Land Co., a mutual-fund company. A
say the
two
trends—rising
premium-grade office space
can’t
keep
China prices
and India,
or to banks.
get closer
to their
WSJ.com/Avianflu
prices in
Japanese
cities are likely clinic affiliated with Johns Hopin the companies.
cities and slumping
prices
up with demand from growing
customers
-- Japanese
car
makers have
continue rising,
while they slip kins University is also located in
The average vacancy rate in Tokyo’s main
opened factoriestothroughout
the U.S.
in the countryside.
the complex.
business districts was 2.9% in December
“Japan
is
changing
into
a
much
—Ayako Nomura
2006, down from 4.2% in December 2005
But those same companies still keep
concentrated service econcontributed to this article.
and 6.1% in December 2004, according to
their marketing more
and finance
functions in
X TO BUSINESSES
Miki
Shoji
Co.,
a real-estate
consultancy.
Japan.
That means less demand for big
f The Wall Street
Journal
Asia
is intended
to include
all significant references
to compaplots
of land outside major cities, where
boldface type in all articles except those on page one and the editorial
pages.
5
7
7
6
The land-price gains were most pronounced in Japan’s big cities -- Tokyo,
European Aeronautic
Defence & Space ........21
Eurotunnel ........................8
Exxon Mobil....................6,8
Ford Motor .................1,6,8
ITT .....................................6
Japaninvest Group ...........24
KB Home .......................27
Kellwood ........................32
Fukui watches real-estate market
but plays down possible rate rises
factories are usually located, and more
demand for offices in city centers that are
Phillips-Van Heusen ........32
PNC Financial Services
Group ..........................24
Porsche ...........................27
Posco ..............................24
Unusual
economic
Unusual economic view puts Japan in tough spot
puts Japan in tough
Business Insight: How to get
it right in China and India
Japan’s Economy
THE JOURNAL REPORT | PAGE R1
Despite
weak
prices,Inc.
growth
may prompt more rate increases
Are
Japan
’s worries
about takeovers overblown?
By Yuka Hayashi - 30 April 2007
HEARD IN ASIA | PAGE 19
Despite weak prices,
and businesses from spending, depressmay
prompt
ing demand andgrowth
putting more
downward
pressure on prices.
more rate increases
TOKYO–Faced with the rare combinaChange Fiscal
October
Friday’s
tion of an expanding economy and weak
in...
year1
forecast
forecast
consumer prices, the Bank of Japan may
consider a highly unusual monetary-pol2.4%
2.1% 2
2007
icy step later this year: boosting interest
But another part of the BOJ’s report
GDP 2008
2.1
2.1
Byeconomy
Yuka Hayashi
rates
if prices are actually World-Wide
falling.
said the Japanese
will stay on
Business
&even
Finance
7
a sustained growth path this year, more
2.1
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Not avail.
apan’s central
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ider a highly
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ary-policy omy
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omy forecast
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policy-board members points to a growth
ven if consumer prices are ac- of a bilateral meeting with Iran.
highly unusual monetary-policy
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2009
rate of 2.1% for the
year ending March
Not avail.
0.5
Deaths from Saturday’s suicide
ually falling. The bank is
step later this year: boosting interthe economy, or to keepcar
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Fiscal years end March 31 of the year shown
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ion of an expanding economy
n At least 300,000 Turks
pro- the ratefalling.
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spiraling
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matches
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the
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nd weak prices. Page 1
A central bank normally raises
Source: Bank of Japan
tested in Istanbul, demanding
estimates the Japanese
economy
reachedoverheatinterest
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the finds
resignation
China’s central
bank raised
The Japanese
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ing of the economy
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bank’s semiannual outlook report,
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had forecast
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Since Nintendo’s Wii console end, the remote takes the place of a
-- the
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monthly
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ales in North
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5 decline
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prices, telecom
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firms
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stores can’t keep the console in
on a Economists
relatively quake-safe route.
price falls were widespread.
stock, and it fetches nearly twice its
say said
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Page
4 say this is temporary
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unlikely that Japan will go back to having
Japan’s trading firms posted for an altercation with his son.
persistent price declines.
olid earnings as investments
2007 Pulitzer Prize
n Australia beat Sri Lanka to
n commodity and trade-linked
win its third cricket World Cup
Still,
such
weakness
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prices
would
make
perations paid off. Page 20
in a row, the first team to do so.
it difficult for the Bank of Japan to raise
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Well-armed Switzerland is
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in journalism > Pages 16-17
Understand more about business
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Still, the Treasury secretary
claimed victory, if in subdued terms.
“I happen to think that dialogue is
Schumer, a New York Democrat,
and Lindsey Graham, a South CaroEconomy
Please turn to pageJapan’s
2
works for Japan
borForeign
workslabor
for Japan
Demographic shifts ease resistance, but issue remains sensitive
ease resistance,
issue
By Yuka Hayashi andbut
Sebastian
Moffettremains
- 25 May 2007 sensitive
s
s
n
te
’t
r
a
a
e
s
g
o
eem
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a.
s-
Even today,
tanceAKEHAMA,
to mass immigraThe
2005 feelings
censusof separation and diftion, is
gradually starting
found
Japanfrom
had other
770,000
ference
countries form a large
Japan–Four
years
to useago,
more
foreigners—
foreign
1.3% identity. Many
part workers,
of Japan’sornational
when
a group
known
gaikokujin
rouof its
workingbelieve
population.
Japanese
the country’s relatively
ofas
farmers
in this
dousha
in Japanese—to
Whilethatisstilltinycomhomogenous population and common
remote
village first
solve brought
its laborinshortage.
pared
withcontribute
the U.S., which
values
to a low crime rate
young
In rural
areas,
foreign
hasand
22 economic
million foreignstrength, and the media
Filipinos
to work
workers
are filling
jobs in
born
workers,separate
making out
up the rate of crimes
regularly
on their
citrus
struggling
industries
15%committed
of the population,
the
by foreigners
from the overall
fields, neighbors
such resisted
as agriculture
number
foreigners in
crimeofrate.
the ideaand
of
textiles.
In industrial
Japan is up 28% from 10
hiring
foreigners.regions, big companies are
years
earlier.
But
as Japan is swept by drastic changes
filling their factories
That is a big change
in its population and economy, Japan
“They said these
with foreigners to assembecause resistance to alis shaking off some of its traditional
men shouldn’t be
ble auto parts and flat- Motosa Katayama lowing in foreign workmore foreigners into
hired
even
if
they
panel TVs. Foreign workers reluctance
runs strongtoinallow
Japan,
the
country.
A
2005
worked
for
free,”
ers serve meals at restaurants and where virtually everyone speaksgovernment survey
that
56%20of respondents said Japan
Pleasefound
turn to
page
stock recalls
shelvesMotosa
at grocery stores.
should accept unskilled foreign workers
Katayama, a ninth-generation farmer
either unconditionally or if certain condiwith a weather-beaten face.
tions are met. Only 26% said they were
opposed to the idea under any circumBut they soon saw the logic. The Filipinos
stance.
performed strenuous tasks such as pruning branches and pulling weeds, becomThe foreign workers tend to do jobs that
ing indispensable to the elderly farmers.
Japanese workers don’t want to do, such
Since then, Akehama, a village with just
as agriculture and construction work. And
100 households, has hosted 70 workers
many are dotted around the country in
from the Philippines and Vietnam.
small, rural communities which are cut off
from mainstream society.
“People began to realize it was so much
better to have someone with you” in the
What is more, in a country where the
field, says Mr. Katayama.
public is strongly aware of demographic
trends, many see foreign workers as ineviJapan, long known for its resistance to
table in the long run. Because of the fallmass immigration, is gradually starting to
ing birth rate, Japan’s working-age popuuse more foreigners -- known as gaikokulation peaked in 1995 and is now falling.
jin roudousha in Japanese -- to solve its
Demographers forecast that by 2025 the
labor shortage. In rural areas, foreign
number of working-age Japanese -- aged
workers are filling jobs in struggling in15 to 64 -- will drop 15% from 84.6 million
dustries such as agriculture and textiles.
in 2005. The drop will be especially sharp
In industrial regions, big companies are
over the next three years: 2007 is the year
filling their factories with foreigners to
that many people born during Japan’s
assemble auto parts and flat-panel TVs.
1947-49 baby boom turn 60, the official
Foreign workers serve meals at restauretirement age at many companies.
rants and stock shelves at grocery stores.
The 2005 census found Japan had
770,000 foreign workers, or 1.3% of its
working population. While that is still
tiny compared with the U.S., which has
22 million foreign-born workers, making
up 15% of the population, the number
of foreigners in Japan is up 28% from 10
years earlier.
The Japanese government has kept a tight
grip on foreigners and their activities.
While officially keeping the door closed,
it has permitted numerous loopholes that
enable hundreds of thousands of foreigners to come and work in Japan every year,
mostly on a temporary basis -- a strategy
some call a “backdoor policy.”
That is a big change because resistance
to allowing in foreign workers runs strong
in Japan, where virtually everyone speaks
Japanese and shares similar ethnic and
cultural backgrounds. From 1639 to
1854, Japan banned nearly all entry and
departure of people from the country
in order to strengthen the government’s
authority. The only time in modern history that large numbers of foreigners have
come to work in Japan was before and
during World War II, when several million Koreans came to Japan while Korea
was a Japanese colony. Toward the end
of the war, many were forced to work in
Japanese mines and factories.
The young men in Akehama, for example,
aren’t technically employed as workers. They are part of 140,000 “trainees”
brought to Japan under a special threeyear government-approved program that
is supposed to teach them skills that they
will take back to their countries. Some are
paid just $2.50 an hour, around half the
lowest of Japan’s minimum wages, which
vary by region.
Some 100,000 foreigners with student
visas are allowed to work part-time, and
most do so for low wages in convenience
stores and fast-food restaurants. And
about 300,000 descendants of Japanese
who emigrated to South America more
than 50 years ago now live and work in Japan, granted visas as relatives of Japanese
citizens.
To be sure, this quiet, backdoor policy
could backfire if the number of foreigners
swells quickly or the workers start competing for more mainstream, blue-collar
jobs. The Japan Association of Corporate
Executives, a powerful business lobby that
supports allowing more foreign workers in
Japan, projected that by 2050, foreigners
would exceed 6.1% of Japan’s working-age
population -- the current level in France,
and nearly five times the current level.
The topic of foreign workers is still a
sensitive issue, and the biggest fear of the
Japanese public is that the foreigners will
commit crime. At least one high-profile
politician, Shintaro Ishihara, governor of
the Tokyo metropolitan region, has made
a name for himself with verbal attacks on
foreigners, saying foreigners “are carrying out extremely heinous crimes.” In
a sign that many Japanese welcome his
outspoken style, he was elected to a third
four-year term on April 8.
“By not calling these people workers and
leaving things vague in a typical Asian
fashion, the Japanese government retains
tremendous control over the situation
for now,” says Bui Chi Trung, a sociology
professor from Vietnam at Aichi Shukutoku University near Nagoya. Eventually,
he says, “Japan may pay dearly for this
policy.”
The first big group of foreign workers
were tens of thousands of Iranians who
came to Japan on tourist visas during the
booming late 1980s -- after which they
then stayed on, illegally, to work. But
after the economy slowed, the government
abolished the visa-waiver agreement for
tourists in 1992.
A more significant experiment with
foreigners was with Latin Americans of
Japanese descent. In 1990, the government made it clear that most descendants
of Japanese emigrants -- who had mostly
left to work as farmers in Brazil during the
first half of the 20th century -- were free
to work in Japan for as long as they wish.
Officially, the reason was unrelated to a
labor shortage. “It was just a natural thing
to take back the descendants of Japanese
people who had left a while ago and now
wanted to come back,” says Saori Fujita,
an immigration policy planner at the
ministry of justice.
As Japan’s auto industry thrived -- and
developed a labor shortage -- in the early
2000s, the large Brazilian community
around Toyota City became a vital part of
the labor force.
Aisin Seiki Co., which supplies Toyota
Motor Corp. with parts like transmissions,
employs about 1,700 Brazilians among
its 6,000 factory workers. The company
has found it hard to recruit new Japanese
workers, who increasingly shun factory
jobs. Most Brazilian workers are hired on
a contract basis, which means they can be
laid off more easily in a downturn -- or if
Aisin decides to move more production
overseas. “Aisin was taking on fewer new
employees” during Japan’s long downturn, says Ryuichiro Yamada, a humanresources manager. In the early 2000s,
“when business boomed, we didn’t have
enough people.”
trainees are paid 62,000 yen, or $510, a
month, and employers say they cost about
the same as part-time Japanese workers
after paying for their room and board,
training and travel expenses. Still, with
so few Japanese workers willing to join
the industry, factory owners even charter
flights from China to bring them over.
There are limitations to many of the
Brazilians’ roles because they don’t all
speak Japanese well. Aisin employs 20
interpreters and has translated essential
notices and manuals into Portuguese.
The Brazilians mainly do more routine
tasks that require less explanation, such
as preparing products for shipment, but
some eventually get taken on as full-time
staff.
The local industry association is now
demanding that the government allow
foreign workers to come in more freely.
“We want the government to do away with
this nonsense and create a system where
people who want to come back are allowed
to do so,” says Kohji Murakami, chairman of the association. “We need foreign
workers, and we need them right now.”
Though most Brazilians intended to stay
just a few years to save money, many are
deciding to remain in Japan. That means
Japan is acquiring its first foreign-language community since it brought over
Koreans to work in factories during
World War II.
Homi estate, a public-housing complex
in Toyota City, was built in the 1970s to
house workers at Toyota’s parts suppliers.
Now, 45% of the roughly 9,000 residents
are South American, predominantly
Brazilian. A Japanese supermarket on the
estate closed last year and a shopping
center owned by a Brazilian took over the
premises.
Japanese residents complained at first
about the loud music young Brazilians
played. But they eventually realized the
Brazilians were there to stay, and made
an effort to educate them in Japan-style
living.
“You have to talk to them one-to-one,”
says Kinuyo Miyagawa, 59, a long-term
Homi resident who is active in the local
residents association.
More recently, foreign workers have
expanded to include fruit pickers, scallop
packers and garment factory workers,
supporting struggling businesses in rural
Japan where the population is declining
most rapidly, as young people leave for
the cities.
Of course, problems inevitably arise.
Trainees can’t change employers, and
during their first year are not protected by
Japanese labor laws.
There is occasional strife, sometimes
serious. Last September, a 26-year-old
Chinese trainee on a pig farm near Tokyo
boycotted work after a pay dispute. A
representative of the staffing agency that
brought him to Japan arrived at the farm
to send him back to China. The trainee
then stabbed him to death, according to a
police spokeswoman.
wages that are higher than they are back
home. Rimando Sitam, a Filipino who has
worked on an Akehama citrus farm for
two years, has a college degree in teaching
but couldn’t find work at home. The 29year-old sends home much of his monthly
salary of $500. That covers more than
half the living expenses of his parents and
six siblings, who live on a small vegetable
farm.
“So many farmers want to be trainees in
Japan because we have no work in the
Philippines,” says Mr. Sitam. “I want to
stay here much longer or come back again
if I can.” When he returns home after the
training period ends, Mr. Sitam is hoping
to find a factory job in South Korea.
Mr. Katayama, the citrus farmer, likes the
trainee system, as it has helped keep his
farm in business for the past few years.
A powerful typhoon destroyed much of
the orange crop in Akehama seven years
ago, wiping out many neighboring farms.
Mr. Katayama and a few of his neighbors
bought some of the land so they could
expand.
After failing to recruit young Japanese
workers, the Akehama citrus farmers
decided to try foreign workers, following
the example of farmers in a nearby town.
They recently set up their own recruiting
agency to bring over new trainees. Most
In December, a Chinese woman trainee
come from Benguet, a province in northin her thirties filed a suit against her host
ern Luzon in the Philippines, where farms
organization and its representative. The
are struggling to compete with imports of
woman alleged she was raped many times
Chinese vegetables. Akehama currently
by the head of the host organization, who
hosts eight trainees -- two Vietnamese
had a key to her dormitory room. Her
women and six Filipinos. Shipbuilding
hosts fully admitted the allegations and
20 FRIDAY - SUNDAY, MAY 25 - 27, 2007
T H E WA L L ST R E E T J O U R N A L .
companies in a nearby town also employ
settled
out of court in February.
some Filipino trainees.
The government says it is planning to
“American farmers use Mexican workers
revise the system, including possibly alto run their farms,” says Mr. Katayama.
lowing trainees to stay even longer.
“So we said, why couldn’t we Japanese
Nonetheless, many young workers are
farmers use foreigners, too?”
eager to come to Japan, attracted by
NEWS INDEPTH
Japan opens door to more foreign work
T H E WA L L ST R E E T J O U R N A L .
THURSDAY, OCTO
NEWS IN DEPTH
Most of these workers have arrived under
the government-sponsored trainee system, originally created to allow big companies to train their overseas staffers in
Japan, and gradually expanded to include
small companies with a labor shortage.
Last year, Japan brought in 68,305 trainees -- double the 2001 level -- in addition
to some 80,000 on an extended program.
The 53 garment factories in Ehime prefecture in western Japan, renowned for
its towel and garment manufacturing in
the 1960s, have been clobbered by cheap
imports from the rest of Asia. They keep
going thanks to some 300 trainees from
China, who work at 36 of these factories
-- all of them small companies with a
few dozen employees -- where they sew
skirts, blouses and school uniforms. The
Understand more about business
Japan’s Economy
T H E WA L L ST R E E T J O U R N A L .
LEADING THE NEWS
In Japan,Japan
new generation
of investors
investor
pushtakes
seescharge
a payoff
appears
Activists use tactics from U.S. to bulldoze changes, boost stock
omentum
Continued from first page
years and provide more information Back-stake drivers
about noncore businesses.
By Andrew Morse - 04 June 2007
When SNT’s president dis- A look at some of the investors pushing Japanese companies to change course
reenwich, Connecticut. “But agreed, Mr. Sayed appealed to
FUND
COMPANY
ISSUE
ng to be somewhat slow be- other investors. He now is preparAtlantic Investment
Dai Nippon Printing
Dividend, buyback, cancel Treasury
of the spike in gasoline ing proxy documents so shareholdManagement
stock, make CEO available, adopt
and the effect that’s going to ers can vote on his plan at SNT’s ancommittee structure
n consumer spending.”
nual meeting June 28.
far, spending appears to be
“We want them to be a professionSafe Harbor
SNT
Dividend, buyback, make CEO available,
g up. In a separate report, the ally managed company with stanInvestment
start investor-relations program, seek
mmerce Department reported dards of management like those
successor, new capital structure
rsonal-consumption expendi- found in Europe or the U.S.,” said Mr.
The
Children's
Fund
Electric
Power
Dividend,
new capital structure
of American households rose
Sayed, whose
Development
April, below
the
average
0.6%
TOKYO–Activfund began
the previous
months but
buying SNT
istthree
shareholders,
K. K. daVinci Advisors
TOC
Challenging management buyout with
gher than who
expectations.
Pershares in Auown buyout plan
have needled
ncome, meanwhile,
gust 2005 and
companiesdeclined
into acSparx
Group
Pentax
Encouraging
company to consider
April—largely
reflecting
now is its largtion in
the U.S.the
and
a merger with a competitor
erce Department’s accounting
est managed
share-company with standards of
Europe, are getting
nus payments, which had
holder,
with a like
Brandes
Investment
Dividend
management
those
foundPartners
in EuropeOno Pharmaceutical
more
aggressive
in
d its estimates of personal in7% stake.
“We
or
the
U.S.,”
said
Mr.
Sayed,
whose
fund
Japan
and
in
some
Harbinger Capital Partners
Doutor Coffee
Challenging merger plan with Nippon
n the previous three months.
want
to help
began
buying SNT shares in August 2005
cases by
areThe
having
an
Restaurant System Inc.
nomists polled
Wall
modernize
the
and now is its largest shareholder, with a
impact.
Journal expect
real gross docompany.”
Partners
Japan
Bull-Dog Sauce
buyout
to focus on Attempting
long-term
goals, Japanese
7% stake. “WeSteel
want
to help
modernize the
product—a broad measure of
Ifcompany.”
such
Strategic Fund
companies
have
lagged
behind those in
In
several
instancmic activity, adjusted for inflamoves gain
the U.S. and
Europebuyout
on a slew of investbothdown
Japanese
Steel Partners Japan
Tenryu Saw
Attempting
o grow 2% es,
in 2007,
from
Omar Sayed
widespread acment benchmarks.
If such moves Strategic
gain widespread
accept- Manufacturing
foreignDepartinvesFund
2006. The and
Commerce
ceptance, they
ance, they have the potential to swing
eported last
that real
torsweek
are pushing
have the potential to swing the balDalton Investments
Fujitec
Pushing management buyout, shedding
The dividend payout at Japanese comrew at an companies
annualized to
rate
of the value of their
the Japan,
balance of power in corporate Japan,
boost
ance of power in corporate
of U.S. and European operations and
6% in the first
quarter,
markpanies
-the
percentage of net earnings
often have remained
shares. In the past, many
investors
would oftenwhere
where
shareholders
haveshareholders
reexpansion in China, opposing poison pill
Source: WSJ research
slowest pace
2002.
given
to
shareholders
through dividends
silent.
“This
activity
is
forcing
managers
havesince
settled
for a boost
in
the
dividend,
mained silent. “This activity is forcU.S. economy’s
!
-- is 24%,
compared
with 27%
the
U.S.
to think
about46%
howatthey
are going
to imbut todayperformthat isn’t seen
sufficient.
ing as
managers
to think about
how
European
companies,
acthought
was unrelated
to in
the
como far falls largely within the
and
46%
at
European
companies,
accordprove
corporate
value,”
said
Hideki
Miho,
they are going to improve corporate cording to investment bank Nikko pany’sM
core
business.
In April 2006,
O N D AY, Nikko
JUNE 4, 2007
plan of theInFederal
Reserve.
ing toSafe
investment
DLIBJ Asset
the latest
case of such
activism,
cam-Miho, an
value,”
said Hideki
an analyst
analyst at Citigroup
Ltd.Management
Return on equity—a
Harborbank
informally Citigroup
inquired
makers had
been
hoping
Ltd. Return
on equity
-- aand
measure
of how
Co., a money-management company that
era maker Pentax Corp. last week bowed
about the
property
requested
lowdown would help cool in- at DLIBJ Asset Management Co., a measure of how much profit a commuchthat
profit
a company
generates
with its
investsthat
more than
$90
billion.with its assets—is
to pressure from shareholders
including company
money-management
pany
generates
SNT
appoint
outside
directors.
, which had been running
assetsIt-is 9.4%,
with to
15%
in
Sparx
Group
Co.,
fund-maninvests more
than $90 billion.
9.4%, compared with 15% in the U.S.
also
askedcompared
the company
look
bove the 1%
to 2%
range
ina Japanese
the
U.S.
and
17%
in
Europe.
In
the
past,
Japanese
management
generagement
company,
and
agreed
to
a
tender
In
the
past,
Japanese
manageand
17%
in
Europe.
for
a
potential
successor
to
the Fed would like to keep it
ally
wasits
left to make
own
generally
make
This its
year,
thedecisions
benchmark Nikkei Mr. Funai, who is now 80 years old.
of 105
($860
million)was left to
long run. offer
Friday,
thebillion
Com- yenment
31
This year,
theSayed
benchmark
Nikkei
Stock
own Hoya
decisions
and paid little
Average
of 225 companies has
Mr.
said he
thought
he
and attenpaid littleStock
attention
to shareholders.
fromreported
optical-glass
Corp.
Department
that maker
tion
to
shareholders.
While
manrisen
4.3%,
while
the
Dow
Jones
Inhad
reached
a
breakthrough
when
Average
of
225
companies
has
risen
4.3%,
While
management
has
had
the
flexibility
Pentax
had
rejected
an
earlier
merger
ex of consumer prices excludhas had
the flexibility to dustrial Average is up 9.7%.
SNT agreed to buy back either one
agreement,
but
came agement
under pressure
from
d and energy,
the Fed’s
preActivist shareholders have million shares or 800 million yen of
measure, shareholders.
rose 0.1% in April focus on long-term goals, Japanese
as up 2% from a year ago. companies have lagged behind adopted tactics and are using legal stock. But the company stopped afthose
U.S. and Europe on a arguments from the U.S.
ter purchasing 16.5% of the value it
an improvement
Anotherfrom
case Febis playing
out.inInthe
NovemPAGE
19 price
slew portfolio
of investment benchmarks.
K.K. daVinci Advisors, a real-es- had pledged to buy. Since SNT
when the
index was
ris-a senior
ber, Omar
Sayed,
The dividend
a year-on-year
rate
2.4%.
adviser
at of
Safe
Harbor Investment
Ltd.,payout at Japa- tate-fund manager in Tokyo, chal- ended the share-buyback program,
Facing
pressure
to catch upthe stock price has fallen about 4%.
nese
companies—the
percentage lenged
a proposed
management
the economy
rebounds,
a U.S. fund, intensified a push to get
of
net
earnings
given
to
shareholdbuyout
of
building-lease
company
Latetolast
year,
Mr.counterparts
Sayed grew imInvestors
in
Japanese
companies
are pushing
match
their
, the addedJapanese
activity could
reigauto-parts maker SNT Corp.
ers through dividends—is 24%, TOC Co. by offering a higher price. patient. He traveled to SNT’s offices
flation, increasing
the
odds
Return on equity
Dividend payout
to boost returns and improve disclosure.
compared with 27% in the U.S. and When management refused to en- Nov. 29 with a 58-page proposal for
d will haveHe
to hit
the brakes. a business
Percentage of net earnings given
Profit a company generates with its
recommended
plan for
dorse its plan, daVinci executives improving SNT’s performance.
to shareholders
assets, as a percentage of total assets
the company that would establish sales
pointed to a U.S. court decision Mr. Sayed said Mr. Funai listened
45.96%poand profit goals for the By
next
three to Morse
Andrew
16.94%
from the 1980s that effectively
re- litely, but made it clear in several
7
five years and provide more information
quired directors to14.91%
accept the high- handwritten letters he wouldn’t
n threatened
tononcore
retargetbusinesses.TOKYO—Activist shareholders, est bid once they decided to sell a agree to the requests. A request to
about
ia’s
missiles
on
Europe
if
who
have
needled
companies
into
ache Wall Street Journal Asia is intended to include all significant references to compa- company.
The share price rose, and SNT for
comment27.44%
was referred to Sa24.19%
9.38%
U.S.
goes
ahead
with
plans
tion
in
the
U.S.
and
Europe,
are
getWhen
SNT’s
president
disagreed,
Mr.
dface type in all articles except those on page one and the editorial pages.
management’s tender offer failed toshi Hashimoto, executive in charge
uild a missile
shield
Mos- to other
ting
more aggressive
in Japan and in to attract enough shares.
Sayed
appealed
investors.
He
of finances. He declined to comment.
opposes. The
in proxy some
cases so
are having an impact.
now escalation
is preparing
documents
Atlantic Investment ManageMr. Sayed said he has gotten
Larsen
&
Toubro
.
.
.
.
.
.
.
.
.
.
.
.
.
20
Siemens
India
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
20
Deutsche
Bank
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
7
n’s anti-Western
tone came
In several
instances, both Japa- ment Inc., a New York firm, has phone calls from shareholders askcanSolar
vote..on
......his
........plan
.....22 atSierra Ventures................30
Dow Jones
....shareholders
....he
.......is
.....scheduled
.....1 LDK
days
before
nese
and
foreign
investors
are
pushSNT’s
meeting
June
28.
urged management of Dai Nippon ing how they can persuade SNT to
Simpson Thacher & Bartlett
Brothers
Holdings
Energy Brands
.............annual
....14 Lehman
eet
with other G-8 leaders
..to
.....boost
.............the
........value
..........7of Printing
Japan
U.S. a structure
Europe address
........companies
....20,23
.................ing
First Pacific .......................7
Co. to adopt
“We’ve
Japan their concerns.
U.S.
Europe
summit
this
week.
10
shares.Singapore
In the past, many in- that would improve corporate gov- been really encouraged by the reMarathon
Focus Media
Holding
......Page
28them
“We
want
to beAsset
a their
professionally
Source: Nikko Citigroup
ndreds
were
injured
in
Telecommunications
.
.
.
.
.
24
Managementvestors
................would
.7
Ford Motor .......................4
have settled for a ernance, require its chief executive sponse,” he said.
....................but
..........today
. . . . .1
..............in
...21theSNT
Fortis
.................police
.............21
hes
between
andMediobanca ...boost
dividend,
to meet with analysts and explain
—Jay Alabaster
Sony
...............................30
Merisant .........that
..........isn’t
.........2seen as
Francedemonstrators
Télécom ...............21during
G-8
($860 million)
optical-glass
ment Ltd.,
a U.S. fund,
intensified
sufficient.
policies,
and shedfrom
noncore
assets,
contributed
to this
article. a
GeneralinMotors
.............Germany.
....4 Merrill Lynch .............21,23 Sparx Group ......................1
otest
northern
maker
Hoya
Corp.
Pentax
had
repush
to
get
Japanese
auto-parts
In
the
latest
case
of
such
activ.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
29
Sprint
Nextel
.
among other things. In March, Dai
Mincor Resources NL
Goldman Sachs Group
jectedannounced
an earlier
merger
agree- maker SNT Corp. to boost returns
maker Motor
Pentax
.........Corp.
.....4
Gas ...camera
......24 Ssangyong
...........it
.....would
........19,21,23
an .said
work toQueensland ism,
Nippon
a share
buyback
Standard
Chartered
.
.
.
.
.
.
.
.
28
ment,
but
came
under
pressure
and improve disclosure. He recom.....last
.........week
........24 bowed to pressure from and
...............dispute
............29 if Mitsubishi
eGoogle
its nuclear
its
dividend boost.
...................Sparx
....28
Morgan Stanley
......2,19,22 Starbucks
HangSeng
......to
......the
...7 U.N.
from
shareholders.
mended a business plan for the comshareholders
including
was
sentBank
back
Institutional
Shareholder
SerSumitomo
Metal
Mining
.24
..............1,24
Harley-Davidson ...............7 News Corp. ...Group
Another
case
isadviser,
playing out.
In No- pany that would establish sales and
Co., aSwiss
Japanese
fund-manhdog
agency,
a
stance
far
vices
Inc.,
the
proxy
expects
Reinsurance
.
.
.
.
.
.
.
.
.
.
20
Nissan Motor .agement
...................4company, and agreed to a
Heidrick & Struggles
vember,
Sayed,
a senior
profit goals for the next three to five
Western
demands
it
that
duringOmar
the main
season
forportfocor.......................2 TAL Apparel ....................31
International
..................7thatNutraSweet
Harry Lee talks
s supply chain
ks might be set
after run-up
News—
In Japan, new generation
of investors takes charge
Activists use tactics
from U.S. to bulldoze
changes, boost stock
World-Wide
TO
BUSINESSES
CORRECTIONS &
AMPLIFICATIONS
years and provide more information
Back-stake drivers
When SNT’s president disagreed, Mr. Sayed appealed to
other investors. He now is preparing proxy documents so shareholders can vote on his plan at SNT’s an-
A look at some of the investors pushing Japanese companies to change course
“We want them to be a professionally managed company with standards of management like those
found in Europe or the U.S.,” said Mr.
Sayed, whose
fund began
buying SNT
shares in August 2005 and
now is its largest
shareholder, with a
7% stake. “We
want to help
modernize the
If
such
moves gain
widespread acceptance, they
have the potential to swing the balance of power in corporate Japan,
WHILETHE$OW*ONES)NDUSTRIAL!VERAGE
where shareholders often have remained silent. “This activity is forcISUP
!CTIVISTSHAREHOLDERSHAVEADOPTEDTAC
TICSANDAREUSINGLEGALARGUMENTSFROM
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POSALSWILLFAREXCEEDLASTYEARkSRECORD
OF
FUND
COMPANY
ISSUE
Atlantic Investment
Management
Dai Nippon Printing
Dividend, buyback, cancel Treasury
stock, make CEO available, adopt
committee structure
Safe Harbor
Investment
SNT
Dividend, buyback, make CEO available,
start investor-relations program, seek
successor, new capital structure
The Children's Fund
Electric Power
Development
Dividend, new capital structure
K. K. daVinci Advisors
TOC
Challenging management buyout with
own buyout plan
Sparx Group
Pentax
Encouraging company to consider
a merger with a competitor
Brandes Investment Partners
Ono Pharmaceutical
Dividend
Harbinger Capital Partners
Doutor Coffee
Challenging merger plan with Nippon
Restaurant System Inc.
Steel Partners Japan
Strategic Fund
Bull-Dog Sauce
Attempting buyout
Steel Partners Japan
Strategic Fund
Tenryu Saw
Manufacturing
Attempting buyout
Dalton Investments
Fujitec
Pushing management buyout, shedding
of U.S. and European operations and
expansion in China, opposing poison pill
Source: WSJ research
3AFE(ARBORkS-R3AYEDAYEAROLD
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*APANkS%CONOMY
*APAN£SINDUSTRYMOVESBACKHOME
%XPERTLABORWEAKYENLEADCOMPANIESTOBUILDMORELOCALFACTORIES
"Y9UKA(AYASHI*UNE
Shifting gears
Japan has opened more factories domestically, amid declining labor costs at home.
foreign competitors. Sharp assemries around the world, including
China and Mexico. But the LCD pan-
4/+9/o*APANESEMANUFACTURERSWHICH
HAVEBEENEAGERTOSHIFTPRODUCTIONTO
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EGYAMONGSOMEOFTHEWORLDkSINDUSTRIAL
HEAVYWEIGHTS
Domestic factory construction in
Japan and overseas operations
started by Japanese companies
Domestic
2,000
Overseas
1,500
Hourly compensation costs for
manufacturing workers, 2005
Country
Cost
China*
$0.67
South Korea
13.56
Mexico
U.S.
1,000
Hong Kong
500
0
Germany
2002
’06
2002
’06
Change from 1995
n/a
86 %
2.63
55
23.65
38
5.65
18
33.00
9.6
Taiwan
6.38
6.5
Japan
21.76
–7.3
4OYOTA-OTOR#ORPAND(ONDA-O
faster pace than overseas. ForeignTOR#OBOTHSELLMORECARSINTHE53
Note: Overseas-operations data are for fiscal years that end on March 31 of year indicated
THANIN*APANBUT4OYOTAHASINVESTED
*China’s compensation costs are for 2004 and refer to all workers, not just production employees
of its overall sales last year, down
THREETIMESASMUCHIN*APANASIN.ORTH
Sources: Japanese Ministry of Economy, Trade and Industry (factories, operations); U.S. Labor Department (costs)
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to themselves, the
workers can minimize their body movements, thus saving time.
“There is no end to the process of
kaizen,” says Ms. Takada, referring to a
trademark practice at Japanese manufacturers that seeks continued improvements in efficiency by eliminating waste.
“I’m always thinking how I can help
improve the quality.”
Until a few years ago, the benefits of
producing goods in Japan were often
outweighed by sky-high labor and other
costs. Since then, however, Japanese
labor has become substantially cheaper,
thanks in part to corporate restructuring
during the country’s more than a decadelong economic slump and a more flexible
labor market.
Aided by labor-market deregulation,
companies have quietly but steadily
replaced millions of expensive full-time
employees with lower-paid temporary
workers. Just 10 years ago, only one in
five Japanese workers was a temporary
worker. Now, one in three is a temp.
between Japan and other Asian nations
is also shrinking because wages in China
and other nations are rising sharply. Pay
in Japan is still higher than South Korea,
where the hourly wage is $13.56, but the
difference is narrower than in 1995 when
the average Japanese worker made nearly
three times as much as a Korean worker.
In addition to making Japanese-made
goods cheaper in overseas markets, the
yen’s current weakness against the dollar and other major currencies makes
Japanese labor even more attractive for
companies with global operations.
For Honda, the biggest reason for deciding to build a third car plant in Japan and
its first here in nearly 30 years was proximity to suppliers, engineers and skilled
workers in another Honda plant. It made
the decision despite Japan’s high land
prices. The new Japanese plant’s site, in
the town of Yorii, is just one-eighth the
size of the parcel to be occupied by a new
Honda plant in Indiana. It is also laid out
on bumpy terrain surrounded by mountains and away from ports with export
facilities.
Koki Hirashima, senior managing director
of Honda, says the company is designing the Yorii plant to serve as a “mother”
factory where manufacturing skills for new
products and technology are established
before some of them are passed on to
overseas factories. One focus will be perfecting environmental technology for cars,
including new ways to reduce carbon-dioxide emissions.
“At our overseas plants, we make improvements on our existing technology,” Mr.
Hirashima says. “At our plants in Japan,
we strive to make completely new things.”
Not only has Japanese labor become
cheaper, but factory automation and the
use of manufacturing robots have reduced reliance on human workers. Canon
has boosted the output of ink and toner
cartridges in Japan by automating the
manufacturing process.
The average dollar-denominated hourly
wage for a Japanese production worker in
manufacturing was $21.76 in 2005, down
7.3% from a decade earlier, according to
the U.S. Bureau of Labor Statistics. During the same period, the average wage in
the U.S. soared 38% to $23.65, while the
German average climbed 9.6% to $33.
The gap in labor
costs
Understand more about business
11
Japan’s Economy
20 07
Help wanted: Japanese women
T H E WA L L ST R E E T J O U R N A L .
THE
NEWSshorter hours, new benefits
Labor crunch spursLEADING
firms to offer
mothers
By Miho Inada - 23 July 2007
Bank profit jumps
nd;
5%
TOKYO–A growing labor shortage is encouraging Japanese companies to pursue
women workers with new vigor -- a big
change from the past when many Ms.
viewed
Lohra said.
“The bank is focusing on feewomen
as a temporary source of labor.
ICICI
Bank
On the job
Percentage of
women in the
civilian labor
force
50%
45
40
based products and services, as
Sweden*
well as
utilizing opportunities pre- *Figures have breaks
Kayoko Mura’s experience illustrates
the
U.S.*
in data caused by the
35
sented
by
the
domestic
and
inter10
U.K.*
redesign of the laborshift. When Ms. Mura quit her accountnational expansion of Indian com- force surveys and
Japan
ing job 16 years ago, her employer,panies,”
food ICICI Bank said in a state- their methodologies
30
8
giant
Kagome Co., did little to stop
her.
Source: U.S. Dept.
ment.
1970
’80
’90
2000
Banks such as ICICI Bank and of Labor
As in many Japanese companies, women
HDFC
Bank Ltd. have benefited
Ltd.
6
mostly played a supportive role at Kagofromgot
India’s researcher
booming economy,
firstme, and many women quit when they
at Fujitsu Research Institute.
companies still tend to demand that
to post growth of
mainly
2
married
or had a child. Ms. Mura,which
who is expected
In terms
of expanding the work force, the
workers put in long hours if they are to be
8.5% for the current fiscal year,
ncome
was getting married and moving from
“priority
is this order: women, the elderly
taken seriously, discouraging women who
which ends March
31, 2008.
redit.
central
Japan to Tokyo, wished she could
And companies
can’t
want to balance
work Last
and year,
familyit life.
0
ICICI Bank and
holdsforeigners.”
more than 30%
ily reasons.
sentOnly
letContinued
from first page
une pe1Q
2Q
3Q but4Qcouldn’t
1Q see
continue
working
wayretail-loan
count
too much
on foreigners
because
of
of women
who
had
a job employees—
a year before
companies
for women
to23%
leave
ofathe
market
in India.
ters to
291
former
rupees
2007
2008
when laws.
they got married or had
chil- a child
Demand for
creditstrict
has raced
mostly
women—alerting
them to
billion
to make
that happen.
Japan’s
immigration
having
were
employed 18 months
Note: Fiscal years end March 31 of year shown
dren.women
During with
the decade-plus
ecoalong with the
growing economy,
itsbirth,
new according
program to
hire
them
s largCompanies
are showering
after
giving
to a
recent
Source: the company
nomic
slump
in Japan thatgovernment
began back
30% annual
credit in an
on a flexible schedule. So
ctor in
“The atmosphere was such that Iwith around perks
and benefits
effort
to retain
study.
growth on average the past three in the 1990s, women were the far, it has hired back four people,
ay. Towouldn’t dare ask for a transfer toyears,
To- underscoring
them. Athe
unit
of apparel company World
It doesn’t help that Japanese men are
need for first to be cut in corporate restruc- including Ms. Mura, and three of
-listed
kyo,”
says
Ms.
Mura,
who
became
a
fullCo.
for
years
relied
on
salespeople
on
a
notorious the
for not
with the houseturings.
Vishaka
Muley
attributed
growth
funds
from
the
housing
and
indusfourhelping
are women.
on rutime homemaker
to raise
two
and mostNow,
wereawomen.
work. And while
women Japanese
are supposed
to
mainly
to a 16% increase
in net
in-daughters.
trial sectors, ascontract
well as a basis,
rise in congrowing labor shortage
Of course,
compalast from
year, an
it turned
of its
6,000 in attitude.
receive equal
law,a in
reality
they
demand
in- is5,000
spurring
a change
strong terest income—the difference be- sumer-credit But
niespay
stillby
have
long
way to
go in
interest
earned
and intermiddle
class. into The
second-biggest
econinter- tween
But last
summer,
Kagome’s
Tokyocreasingly
office affluent
contract
workers
staffworld’s
employees.
earn
only 67%
of what
menother
earn.nations in
catching
up with
paid—to
17.14Mura,
billionnow
rupees
HDFC Bank,
whichtheir
has ahealth-insurance
strong omy is continuing
to expand, and making full use of women workan my est
sought
out Ms.
44 years old,
While
and pension
a 35% her
riseback
in feetoincome.
presence in the
retail lending
last year
there
were more
jobs
” said and
ers. Even
passed a
andtowooed
the same kind
benefits
remainmarthe same,
the new
status
“It’s
not difficult
tothough
set up Japan
a [female“Their interest expenses grew ket, this month posted 34% growth than job seekers for the first time law in 1986 to forbid sex discrimiumbaiof
job
that
she
had
before.
It
assigned
a
frees
them
from
having
to
renew
their
friendly]
system,”
says
Shoko
Kobayashi,
64% on year because of higher av- in its net profit for the fiscal first in 14 years. The labor crunch is ex- nation in the workplace, advanceking.
system
engineer
to Ms.quarter,
Mura spurred
contracts
year. pected to get worse in the
manager
a division promoting women
cost
of fundsexclusively
while their inby a riseeach
in internext of
Officer erage
ment for women has been slow:
until income
she gotgrew
up to50%,”
speed
with
Mizuho’s
corporate-banking
unit.
“The
terest
said
Ms.the comfew years as Japan’sat baby
Women
in Japan hold only
10%
of
Lohra,
why the
figure
boomers
start to retire.
The part
puter explaining
system. Kagome
even
accepted her
“We wanted talented women
to continue
hardest
is changing
people’s
mentalmanagerial
posts,
and Japanese
came
in below
herpart-time
expectations.
who number about
request
to work
just three days
working with us,” saysboomers,
Masako Wakimoto,
ity. It6.7takes
a long time.”
companies
still The
tendcompany
to demand
interest
margin
contracted
million,
a that
workers child-care
put in longleave
hourstoif
a Net
week,
six hours
a day.
a company spokeswoman.
“Wewere
don’tmostly
want born
hasinrecently
extended
to 2.3% from 2.5% a year earlier,
three-year period between 1947 they are to be taken seriously, disrivals to take them away.”
two years from one, and it exempts women
hurt by an increase in the cash-reand 1949. Then, legalized abor- couraging women who want to
“There
aretomany
who
Mizuho Financial Group
one of
from
having to work overtime until their
spent serve
ratio
6.5% women
from 6%,
thequit after
tionInc.,
and birth
control began
to rebalance work and family life.
we had
spentchief
time said.
and money in trainJapan’s major banks, recently
a As ayoungest
enters
elementary
school.
HDFC bank’s
finance
duce the opened
birth rate.
result, child
Only 23%
of women
who had
a job
ing,”
Tomoko
a Kagome
day-care center for employees
in
its
Tokyo
But
it
doesn’t
have
anyhaving
data toa show
lomerMs. says
Lohra
said sheSone,
expects
the
longer term, the situation is un- a year
before
child were
e 8 on bank
to maintain or
expand
net inlikely to improve:
In Japan’s
ag- these
spokeswoman.
“For
the company,
[not
training center -- an extremely
rare move
whether
measures
have succeeded
employed
18 months
after givingin
in In- terest
in the second
ing Nihon
society,Unisys
its working-age
popu- women.
hiringmargin
them back]
is suchquara waste.”
for a Japanese company.
retaining
birth, according to a recent govstment ter ending Sept. 30, on an ex- est income, and
it expects
lation is expected
Ltd.said
last year
started allowing
women to fall 15% be- ernment study.
C has a pected cut of 0.25 to 0.5 percent- growth to be stable despite rising tween 2005 and 2025.
It doesn’t
help that
Japanese
Though
rarely
an
official
rule,
it
used
to
work
shorter
hours
until
their
youngStill, the change
in corporate
attitudes
is
age point on deposit rates, as well interest rates.
“Management knows about men are notorious for not helping
to
be
customary
at
many
companies
for
est
child
finishes
high
school.
Others
are
welcome
news
to
many
Japanese
women,
as a cut in lending rates.
The Reserve Bank of India is the tightening labor market,” with the housework. And while
women
to leave
theygrew
got married
extended
leaveAtsumi,
and a researcher
especially those who have dropped out of
manuICICI also
saidwhen
deposits
meeting July offering
31 to review
India’smaternity
says Naoki
women are supposed to receive
or had
children.
During
the decade-plus
discount
and Institute.
the work
care
their
families.
vanced 26%
from
a year
earlier
to credit policy and
decidecoupons
on short-for baby-sitting
at Fujitsu Research
In force
equalto
pay
byfor
law,
in reality
they
rrectly 2.307.88
trillion
rupees.
terminrates. housecleaning services.
terms of expanding theThe
work
economic
slump
in Japan that began
lifestyle
ofonly
a full-time
homemaker,
earn
67% of what
men earn.
a TechAs
of
June
30,
the
bank’s
net
Since
January
2006,
the
central
force,
the
“priority
is
this
order:
the 1990s, women were the first to be cut
long seen as a
privilege,
is losing
“It’s
not difficult
to setits
upallure
a [feursday nonperforming
assets were at bank has raised
its key overnightelderly and foreignin corporate restructurings.
Kagome,
where femalewomen,
workersthe
account
as more women
seek a sense
of accommale-friendly]
system,”
says
e effi- 1.3% of net customer assets, as lending rate by 1.5 percentage ers.” And companies can’t count
Kobayashi,
manager
of a difor only 21% of the 1,400 employees, says
plishmentShoko
outside
the home.
But until
nufac- against 0.98% a year earlier. “The points to 7.75% as part of efforts to too much on foreigners because
vision
promoting
at MizuNow, asset
a growing
labor
shortage is spurit doesn’t face a serious
shortage
recently, once
women
quit women
their jobs,
their
bank’s
quality
is a concern,”
check inflation.
of labor
Japan’s
strict immigration
ho’s were
corporate-banking
ring a change in attitude. The world’s
yet, but it knows that laws.
it will eventually. It
opportunities
usually limited tounit.
a
hardest part
is changing
peosecond-biggest economy is continuing
decided to target former Companies
employees behandful of“The
low-paying
positions
at retailare showering
ple’s mentality. It takes a long
women
withwith
perks
and benefits
in restaurants.
to expand, and last year there were more
cause they were already
familiar
the
ers and
time.” The company has recently
effort
toleft
retain
jobs than job seekers for the first time in
corporate culture andan
most
had
for them. A unit of extended child-care leave to two
apparel
company
World
Co.
for
14 years. The labor crunch is expected
family reasons. Last year, it sent letters
Ms. Mura says she longed to go back to
n today’s issue of The Wall Street Journal Asia is intended to include all significant references to companies. years relied on salespeople on a years from one, and it exempts
womenfeel
from
having toenough
work overto get
worse
in theexcept
nextthose
few on
years
to 291
former employees
-- mostly women
work but didn’t
confident
appear in boldface
type
in all articles
pageas
one and the editorial
pages.
contract basis, and most were
time untilcompletely
their youngest
child
Japan’s baby boomers start to retire. The
-- alerting them to itswomen.
new program
to hire
start something
new.
SheenBut last
year, it to
turned
ters
elementary
school.
But to
it
boomers,
who
number
about
6.7
million,
them
back
on
a
flexible
schedule.
So
far,
it
contacted
a
friend
at
Kagome
last
year
5,000 of its 6,000 contract workAssurance .......32 eBay ............................29 Merck & Co. ...................8 Sony ...............................8
doesn’t have any data to show
were mostly
period
hiredAirlines
back .four
including
Ms.
inquire
ers into
staff employees.
While about job opportunities and found
Electronicborn
Arts ...in
.....a
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llar ...........9,21,32
..............21 has
whether these measures have sucand
Group .and
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Stone Tower
andCapital
three .22
of thetheir
four health-insurance
are women.
outpenabout ceeded
the hire-back
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.......................between
.....4 EMI 1947
MicronlegalTechnology ......32 Mura,
in retaining
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.
21
Exxon
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.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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sion
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.
.
.
.
.
.
.
.
.
.
.
.
8,29,32
ized abortion
and
birth
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began
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she
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Still, the change in corporate
..................................22
agement ........6,22 Ford Motor ....................6 Mizuho Financial Group 2
the new status
frees them
reduce the birth rate. As a result, longer
Of course, Japanese companies
still have
thefrom
new program and quickly called her
Mobile..................7 Foreign Tire Sales ......12 Monster Worldwide ...22 Taixing Glycerin Factory
having to renew their contracts attitudes is welcome news to
...........way
..........to
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.12 catching up with other
Electric .....is
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21 Morley
the situation
toFund
improve:
a long
old employer.
many Japanese women, espePetroleum & term, General
each year.
Take-Two Interactive
Generalaging
Motorssociety,
.............6 itsManagement
mical .............19,20
In Japan’s
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making
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“We
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.
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.
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Software
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.
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22
National
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the work
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Japan
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“I thought
thisofcan’t
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Ms. for
continue
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leum ...........19,20 Google .............8,21,29,32 Nestlé...........................30 Telecom Italia ................7
their families.
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.
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.
.
.
.
12
between
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in
1986
to
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how
the
company
agreed
............................9
News Corp. ...................6 Terra Firma Capital
full-time homemaker, long seen
pany spokeswoman.
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advancement
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as a privilege, is losing its allure
HDFC Ltd. ......................2
want
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.....................19,20
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as more
Mizuho
Financial
Group
Inc.,
ola .....................21
Nihon
Unisys
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2
Toshiba
...................9,32posts, and Japanese
ing labor
market,”
says Naoki Atsumi, a
10%
of...managerial
High-Grade
Structured
complishment
outside the home.
dated Minerals 21
one of Japan’s major banks, reNike ...............................7 Toyota Motor .................6
Credit Strategies
ental 12
AG ..............8
cently opened a day-care center But until recently, once women
Noble Group ................21 TRIO Finance ..............22
Enhanced Leverage
rChrysler .......6,22
Fund ..........................19 Old Hill Partners .........22 TRW Automotive
for employees in its Tokyo train- quit their jobs, their opportuniecometal ..........21 Holme Roberts & Owen6 Oracle ..........................32
Holdings ......................8
ing center—an extremely rare ties were usually limited to a
..........................32 Hon Hai Precision
Pentax ............................6 Unilever........................30
move for a Japanese company. Ni- handful of low-paying positions
Net profit, in billions of rupees
Japanese firms woo women
India’s economy is
expected to post
8.5% growth for the
current fiscal year.
&
S
INDEX TO BUSINESSES
m .......................9
Industry ....................32
Union Pacific................21
Understand more about business
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14
conomic changes
er
n
ou-
eg
g
d
g
es
o
kse
d
n-
s-
Japan’s Economy
Abe’s exit could imperil Japan economic changes
ignation yesterday, lasted less than the next administration might seek
a year. While public opinion fa- approval for an extra budget of
vored another tough leader able to around two trillion yen ($17.5 bilforce the country through changes, lion).Hecalledthat and theotherpoMr. Abe appeared indecisive and tential backsliding a “nightmare.”
was bogged down by a scandalMr. Abe, 53 years old, was choplagued
Cabinet.Moffett - 13 September 2007
sen to succeed Mr. Koizumi beBy Sebastian
The leading candidate
cause he shared his ideas
to succeed
Mr. Abe is Taro
of small government, deTOKYO–With
Aso, secretary-general
regulation and assertive
Prime Minister of
the ruling
Liberal
Demoforeign policy. But Mr.
Shinzo
Abe on
his
craticway
Party.
veteran
Abe didn’t know how to
out,The
Japan
politician
seen asbackmore
put them into practice
facesisfurther
effective,
butfrom
he faces
and instead became like
sliding
the a
split economic
Parliament
where
Japan’s weak leaders of
overhaul
the ruling
coalition
the past. That led to a diachieved
by his controls only one house.
sastrous election six
popular predSome analysts think
weeks ago, when his coaecessor, Junichiro
Japan could slide back
lition was soundly deKoizumi.
into an era of pork-barrel
feated and lost control of
spending, and the next
Japan’s upper house,
Japan,
the
first
Shinzo Abe
prime minister might
making it impossible to
in the
hand nation
out more
money to
govern effectively. Yesdeveloped
world voters—a terday, he decided enough was
please
discontented
suffer
a declining
fears a
movetothat
would
worsenpopulation,
Japan’s enough.
fall in living debt
standards
andthe
retreat on
the reaction was moderhuge government
and slow
Market
stage
as China
advances. The
bigpessimistic, as the prospect
drive world
toward
higher
productivity.
ately
fear now:
anotherchief
weak Japan
leader. of a leadership vacuum slightly outRobert
Feldman,
Please turn to page 16
economist at Morgan Stanley, said
“We have a bunch of candidates who
want to change this and undo that in
reform policy,” said Heizo Takenaka, a
former government minister who helped
Yesterday, he decided enough was enough.
Mr. Koizumi drive through his changes.
“There would be a huge negative impact
Market reaction was moderately pessimison the economy if reform loses momentic, as the prospect of a leadership vacutum.”
um slightly outweighed hopes surrounding
a replacement for Mr. Abe. The Nikkei
tions Mr.
for clues
who Mr. Putin
fellow veterans
of Average
the KGB,
the companies edged
Abe, about
who announced
his resignation
Stock
of 225
will back
to replace
presisecurity
and
intelliyesterday,
lastedhim
lessasthan
a year.former
While Sovietlower
on the news because of the politident public
when opinion
his term
endsanother
next tough
gence agency.cal uncertainty. The yen was relatively
favored
spring.
Mr. Putin has repeatedly said he
leader able to force the country through
unchanged at about 114 to the dollar.
Mr. Putin enjoys huge popular aims to ensure his policies are conchanges, Mr. Abe appeared indecisive
support but has so far given no hint tinued after he leaves office, pointand was bogged down by a scandalTheheimmediate
cause of Mr. Abe’s downas to who he favors to replace him edly noting that
plans to remain
Cabinet. requires, an importantfall
was a figure.
series of difficulties that showed
when,plagued
as the constitution
political
himdoesn’t
not to be
in charge.
he steps down next year. YesterMr. Zubkov
appear
to The government
leading
succeedhave
Mr. a background
was discovered
to have lost 64 million
day’s The
reshuffle,
incandidate
which Mr.toPutin
in the security
Abethe
is Taro
Aso,
secretary-general
of the but national
pension
which led many
removed
entire
21-person
cabi- services,
he worked
in Mr.records,
Puruling
Liberal
Democratic
Party.
The
Japanese
to worry
how they would
net along with Prime Minister tin’s vetstaff in the
mayor’s
officeabout
in
eran
politician
islittle
seen to
asclarmore effective,
afterearly
retirement
Mikhail
Fradkov,
does
St. Petersburglive
in the
1990s, adespite having paid
but
he faces
a split Parliament
where
intofuture
the national
pension system all their
ify the
picture,
analysts
said.
time the
when the
president
ruling
coalition
controls
house. with many
working
lives.
Several
Even
so, Mr.
Putin has
helpedonly
en- onebonded
of his
closest
al- of his ministers
were caught up in small-scale scandals
sure his policies are continued by lies.
analysts think
Japan
could slide
relatedpreserving
to questionable
fillingSome
the government
and
major
“This is about
the expenses and
into anwith
era of
pork-barrel
state back
companies
longtime
al- spending,
continuity of political
Vladimirdonations.
Putin’s polilies and
many
of themmight handPlease turn to page 2
andsupporters,
the next prime
minister
out more money to please discontented
Until the early 1990s, when Japan’s
voters -- a move that would worsen Jaeconomy was growing fast, strong political
pan’s huge government debt and slow the
leadership wasn’t such an issue. But after
drive toward higher productivity.
the stock-and-property bubble popped,
Robert Feldman, chief Japan economist
the country spent about a decade mired
at Morgan Stanley, said the next adminin troubles related to bad loans at banks
istration might seek approval for an extra
and falling asset prices. Now, Japan’s
budget of around two trillion yen ($17.5
economic system needs retooling so that
billion). He called that and the other
fewer workers can generate more output to
potential backsliding a “nightmare.”
support the growing elderly population.
Any successor faces divided Parliament; back to pork barrel?
s intrigue ahead of vote
minister fails to clarify Kremlin succession
nt
enal
e
al
e
c-
Mr. Abe, 53 years old, was chosen to
Mr. Koizumi was just what the country
succeed Mr. Koizumi because he shared
wanted at the time: an aggressive, decisive
his ideas of small government, deregulaleader with a clear vision for an open
tion and assertive foreign policy. But Mr.
economy, small government and asserAbe didn’t know how to put them into
tive foreign policy. He took office in 2001
practice and instead became like Japan’s
vowing to transform the nation, and then
weak leaders of the past. That led to a
fixed the banks’ bad loan problems and
election sixof
weeks
ago, whenmarkets.
slashed public spending.
Atdisastrous
the centre
Asia’s
his coalition was soundly defeated and
Atlostthe
leading
edge.
control
of Japan’s upper
house, makMr. Abe was chosen just under a year ago
ing it impossible to govern effectively.
to take over because he shared many of
A Passion to Perform.
This advertisement has been approved and/or communicated by Deutsche Bank AG and appears as a matter of record only. Copyright Deutsche Bank AG 2007.
Mr. Koizumi’s policy views. But he lacked
the political skill to execute big policies,
and appeared soft and irresolute. Even
his reaction to the July election defeat has
been indecisive. At first he said he would
stay on, and on Aug. 27 he announced a
new Cabinet full of veteran lawmakers,
showing apparent determination to carry
out his policies.
That soon looked impossible. Though the
ruling coalition’s lower-house majority
would be enough to overrule any objection
by the opposition-controlled upper house,
this process takes a couple of months,
meaning the administration can’t act fast.
And timing was crucial to renew an antiterrorism law that expires Nov. 1 enabling
Japan to supply fuel to U.S.-led forces
fighting in Afghanistan. The opposition
Democratic Party of Japan disapproves,
saying Japan’s forces should only take
part in overseas operations led by the
United Nations.
On Sunday, Mr. Abe said he would “stake”
his job on the antiterrorism law, a statement that was interpreted to mean he
would quit if he failed to push it through
Parliament. The following day he made a
policy speech in Parliament, hurrying his
words nervously and almost shouting out
a to-do list for the coming months.
Yesterday, he reversed course after the
DPJ leader refused to meet with him to
discuss the law.
“This was a central pillar of the assertive
foreign policy that I support,” he said.
“Japan must continue its fight against ter-
Understand more about business
15
shrank in the second quarter, but econo
say this was a blip and mostly foreca
growth both this year and next.
The big question is how capable Ja
next leaders will be in deciding how to pr
Japan for a future with a declining popula
Mr. Takenaka, an economics profess
Keio University and Mr. Koizumi’s one
Japanese “manga” comic books, which
economics minister, says Japan needs p
he believes can be a big way for Japan to
There is a limittive
to what
successor
will
steps any
to prepare
its economy
for th
influence the world.
be able to do. Though
prime he
ministure. Forthe
example,
says, Tokyo’s
ter can dissolve
theinternational
lower house when
he should
two
airports
allowed
to upper
open around
Other leading candidates include former
likes, he can’t be
dissolve
the
house,the clock
the city’s
The
finance minister Sadakazu Tanigaki,
making it hardtotoboost
pass many
kindseconomy.
of
62, who favors an increase in Japan’s 5%
legislation. country’s vast foreign-currency reserves
managed
by bureaucrats—
consumption tax to reduce the national
It is unlikely that
theare
change
at the
top
Out ofAnother
the picture:
A man passes
TV monitors
displaying
a live
broadcast
Prime
but
Mr. Takenaka
says
theseMinister
could Shin
debt.
possible
contender,
foreignin Tokyo
will
hurt the
economy
in of
theJapanese
short
run,
behealthy
managed
more
by an
minister Nobutaka Machimura, 62, supas it is basically
and
haseffectively
been
independent agency, in the way that
ports education reform to revive patriotgrowing at about
2% a year
since
2003.
liament, hurrying his words nervously and al- served as Mr. Singapore
Koizumi’sand
andSouth
then Korea
Mr. Abe’s
do. And,comic
ism.
Yasuo
Fukuda,
71,
has
long
stressed
The
government
announced
Monday
that
most shouting out a to-do list for the coming foreign minister.
Like
those
two,
Mr.
Aso
sup- way f
he says, Japan’s big public
universithe
need for good relations with China
gross
product
shrank
in thealliance
sec-should Ot
months.
portsdomestic
Japan’s strengthening
defense
ties,
like Tokyo
University,
andYesterday,
South Korea.
say this
was
he reversed course after the ond
withquarter,
the U.S.but
be economists
privatized and
encouraged
tofinan
and children
mostly
forecast
2%
both uni-favor
DPJ leader refused to meet with him to dis- a blip
“Even
know
that
ifinternational
you cannot
compete
with
topgrowth
Many
Japanese
this
yearyourself,
and next.
cuss the
law. would like Mr. Koizumi,
protect
it’s wise to get along well tion t
versities.
65, to
return.
But
whenpillar
he left
last
“This
was a
central
of office
the assertive
with someone strong,”
he wrotethese
in a steps,
book wepossi
“To implement
year,
he told
reporters
he was looking
foreign
policy
that I support,”
he said. “Ja- The
published
in need
June.
He
favors
big question
isahow
capable
Japan’s
leader
whoderegulation
has
a strong abil-taka M
pan must
its fight
terrorism
and smaller
government
over tax
and
redis- form
forward
tocontinue
his freedom,
andagainst
he is said
to
next
leaders will
in deciding
how
toimplement,”
ity be
to conceptualize
and
he
under
a newthis
prime
tribution
policies.
“If
an
has fo
lo
But
saysmaking
none aofdeclining
theeffort
candidates
be
enjoying
now.minister.”
prepare
Japan
for ahefuture
with
The LDP will choose a new leader over the doesn’t generate
in this
wealth,
Abe’s differences
successor have
desire with
or a
next week or so. The overwhelming favorite fewer people will
make
an effort,” in
hereform
wrote. wouldMa
“Losing
momentum
h
is Mr. Aso, 66, a former justice minister who And Mr. Aso ishuge,
a big fan
of Japanese
65, to
negative
impact“manga”
on the economy.
However, public-spending cuts are w
believed to have caused income disparit
tween provincial Japan and the big citi
the July election, the DPJ exploited this
cern, promising measures such as income
port for farmers. Since then, some LDP
subsidized
resignation.
n Sept. 26, 2006:
ers have indicated
thatMr.
they would like t
Yanagisawa
apologizes, the possi
Abe,
picturedof Japanese Prime Minister Shinzo Abeapartment.
okyo displaying Mr.
a live
broadcast
announcing his resignation yesterday.
more done about
this—raising
his job.public spending
right, becomes
of a return tokeeps
the heavy
n Dec. 27: The
prime minister
past.
minister for
n April 13: A visit
withKoizumi’s
approval and then Mr. Abe’s
“The situation
ofbysmaller
served as Mr.
comic books,
which he believes can be a big
administrative
to Japan
Chinese businesse
ratings Like
of around
the regions isn’t
so good,
so we need to
foreign minister.
those two, Mr. Aso sup- way for Japan
to Genichiro
influence the world.
reform,
Premier
Wen Jiabao
60%.strengthening defense alliance
what to do about
this,”
Finance
ports Japan’s
Other leading
candidates include former
Sata, quits
further
thaws
ties Minister
shiro Nukagabetween
told The
with thenU.S.
finance minister
Sadakazu Tanigaki, 62, who
Oct. 8-9: Mr. Abe
after questions
theWall
two Street Jour
an interviewnations
last week.
“Even children
know that if you cannot favors an increase
in Japan’s 5% consumpmeets with
about financial
and boosts
A government
budget
outline for nex
protect yourself,
it’s
wise to get along well tion tax to reduce
the national debt. Another
leaders of
China,
statements
Mr. Abe’s
ratings.
called for trimming
public-works
spendi
with someone
strong,”
possible contender,
second
right, he wrote in a book
submitted foreign minister NobuMr. Wen’s
trip is the
3% from thisfirst
year—a
continuation of Mr
published and
in June.
He favors deregulation taka Machimura,
62,ofsupports education reSouth Korea;
by a group
by a Chinese
zumi’s policy.
But since
the 2000.
latest outline
and smaller
government
over tax and redis- form to revive
patriotism. Yasuo Fukuda, 71,
improves
ties
his political
premier
proved after the
LDP lost the upper-house
tribution frayed
policies.
has long stressed
the need for good relations
by his“If making an effort
supporters.
n April 26-27: Mr.
tion—also allowed
ministries
doesn’t generate
differences
in wealth, with China
and South Korea.
predecessor,
Junichiro Koizumi.
n Jan. 27, 2007:
Abe travels
to the to increase
get requests U.S.
for revitalizing
fewer people
will make an effort,” he wrote.
Many Japanese
would like Mr. Koizumi,
n Dec. 21: Tax Commission Chairman Masaaki
Health Minister
to meet with regions and
proving
theatstability
of people’s
And Mr. Aso
is a bigresigns
fan ofafter
Japanese
“manga”
But
when he
left
office
last
Homma,
media reports
that he65,
is to return.
Hakuo
Yanagisawa
calls
women
“birth-giving
President George
W. Bush
Camp David,
right, liveliho
policy. He took office in 2001 vowing to transform the nation, and then fixed the banks’ bad
loan problems and slashed public spending.
Mr. Abe was chosen just under a year ago
to take over because he shared many of
Mr. Koizumi’s policy views. But he lacked the
political skill to execute big policies, and aprorism
a new
prime minister.”
pearedunder
soft and
irresolute.
Even his reaction
to the July election defeat has been indeciThe
willhechoose
new leader
over
sive.LDP
At first
said heawould
stay on,
and on
Aug.next
27 he
announced
a new
Cabinet full of
the
week
or so. The
overwhelming
veteran lawmakers,
showing
apparent
deterfavorite
is Mr. Aso, 66,
a former
justice
minationwho
to carry
out
minister
served
ashis
Mr.policies.
Koizumi’s
lookedforeign
impossible.
Though
andThat
thensoon
Mr. Abe’s
minister.
Likethe
rulingtwo,
coalition’s
lower-house
majority
those
Mr. Aso supports
Japan’s
would be enough
to overrule
objection
strengthening
defense
allianceany
with
the
by the opposition-controlled upper house,
U.S.
this process takes a couple of months, meaning the administration can’t act fast.
“Even
children know that if you cannot
And timing was crucial to renew an antiprotect
yourself,
wise to
get1 enabling
along well
terrorism
law thatit’s
expires
Nov.
Jawith
someone
strong,”
he wrote
in afighting
book
pan to
supply fuel
to U.S.-led
forces
published
in June.
Heopposition
favors deregulain Afghanistan.
The
Democratic
tion
government saying
over tax
Partyand
of smaller
Japan disapproves,
Japan’s
and
redistribution
policies.
“If
makingoperforces
should only take
part in
overseas
an
effort
differences in
ations
leddoesn’t
by the generate
United Nations.
On Sunday,
Mr. Abe
said
he would
“stake”
wealth,
fewer people
will
make
an effort,”
hiswrote.
job on And
the antiterrorism
law,fan
a statement
he
Mr. Aso is a big
of
that was interpreted to mean he would quit if
he failed to push it through Parliament. The
following day he made a policy speech in Par-
Shinzo Abe’s year in power
living with a mistress in an upscale government-
machines” in a speech, prompting calls for his
his first U.S. trip as prime minister.
resignation. Mr.
Yanagisawa apologizes,
keeps his job.
n April 13: A visit
to Japan by Chinese
Premier Wen Jiabao
further thaws ties
between the two
nations and boosts
Mr. Abe’s ratings.
Mr. Wen’s trip is the
first by a Chinese
premier since 2000.
n April 26-27: Mr.
Abe travels to the
U.S. to meet with
President George W. Bush at Camp David, right,
his first U.S. trip as prime minister.
16
n May 28: Farm Minister Toshikatsu Matsuo
under fire for a series of funding scandals,
himself.
n June 15: Mr. Abe’s support rate falls below
30%—seen by many analysts as a crisis lev
the first time since taking office.
and propelled him to a spectacular 1990s. We should never let reform lose its
omists toring sensitive industries,” says Kirby Daley,
important policies was Heizo Tak- WSJ: What types
he big question is how capable Japan’s this.” Mr. Daley says the
change in attitude has
versities.
ther died, Mr. Abe in 1993 took over
general-election
victory in 2005.
ast 2% a strategist at Société Générale’s Fimat broker
momentum.
Aso
need?
enaka,
anTaro
academic
economist
leaders will be in deciding how to prepare driven many of his clients
out of Japan
to
“To implement
these
we
his seat inwho
Parliament.
The architect
of some
of steps,
his most
division. “There’s another agenda behind
Mr.
Th
served
in
Mr.
Koizumi’s
administran for a future with a declining population. places like Singaporeneed
andaHong
Kong.
whowas
has aHeizo
strong Takabil- WSJ: What types of reform
He later took
the Takenaka:
cause of famdoesupJapan
important leader
policies
apan’s this.” Mr. Daley says the change in attitude has
form—reactive
tion forsays.
four years.
First,
he forced
Mr. Takenaka, an economics professor at
Financial-servicesityminister
Yoshimi and
Wa-implement,”
to conceptualize
ilies whose
relatives
had been
abducted fromre
need?
enaka, an
academic economist
who he
repare driven many of his clients out of Japan to
form.
up b
banksfor
to Mr.
write
off their
mountains
of Korean
University
andlike
Mr.Singapore
Koizumi’sand
onetime
tanabe hinted inserved
a recent
that
some
acButinspeech
heMr.
says
none
of the
candidates
Japanese
beaches
by North
agents and
Mr.
Takenaka:
There
are two
types
of
re- Cleaning
Koizumi’s
administralation.
places
Hong Kong.
form.
Japan
has
bad
loans,
which
had
jammed
up
Jaomics
minister,
says
Japan
needs
proactivist
hedge
funds
targeting
Japanese
compasuccessor
forced reform
to live in
theproactive
North for remore than 20 fi
form—reactive
and
tion Abe’s
for four
years. have
First,this
he desire
forcedor ability.
sor at
Financial-services minister Yoshimi Waproactiv
pan’s
financial
system
and
steps
its economy
forspeech
the fu-thatnies
be allowed
to
operate.
“Losing
momentum
in
reform would
have
aCleaning
years.
Under
Mr.contribKoizumi,
hereform.
helped
engineer
up
bad
loans
was reactive
re- In
banks
to write
off their “We
mountains
of form.
etimeto prepare
tanabe hinted
in a recent
someshouldn’t
acuted
theJapan
country’s
long
For example,
he
says,
Tokyo’s
the
Japanese
market
tojammed
be-a but
population.
arebad
managed
by
bureaucrats
Mr.
this
concern,
promising
measures
such
as less
huge, negative
impact
on
theup
economy.”
thehas
return
of some
ofthis
these
to of
Japan,
some-lis
form.
finished
with
type
loans,
which
had
Ja- to
proactivist
hedge
funds
targeting Japanese compa- want
done.
economic
downturn.
Later,
international
airports should
that
from
around
Takenaka
says fish
these
could
be
managed
income
support
for
farmers.
Since
then,
However,
public-spending
cuts
are reform.
widely
that
made
him
hugely
pre- P
Inthing
proactive
reform,
there
is anpopular
end- and
pan’sattracts
financial
system
and
contribhe
fu- nies shouldn’t
be allowed to operate. “We pond
just the
he
became
minister
inwhat
lowed to open
thethe
clock
world,”
said.
Mr. around
Takenaka,
effectively
byhave
an independent
agensome
LDP
leaders
indicated
that
believed
to
caused
income
disparity
be- the
pared
the way
for his
ascent to
prime
less
list
ofhave
needs
be minister.
uted
toMr.
the Watanabe
country’s
long
want
Japanese market to be a themore
to and
be a s
ofthey
privatizing
Japan’s
oost the city’s
economy.
The
weway
have
to take
out
piratween
provincial
Japan
andSouth
thecharge
big cities.
In would
Mr.
Abe
started
an economics
cy,economic
in the
that
Singapore
and
like
to see
morewell,
donevisiting
about
done.
Postal
privatization
was China
downturn.
Later,
pond that
attracts fish from around “However,
postthis
office,
deposit
try’s vast professor
foreign-currency
re- Mr. Watanabe said. nhas
if
come.”
thehappen
July the
election,
the DPJ
exploited
conSouth
Korea,
where
he improved
just the
first
step, and
there
haveties that had
hethey
became
minister
in big
the
world,”
at Keio
Korea
do.
And,
hetosays,
Japan’s
public
this --whose
raising
the
possibility
of a return
insurance
arms
itMr.
es are managed
by bureaucrats—
Mr.charge
Abe’s
rise measures
and
fall such
cern,
promising
asand
income
supsoured
under
Koizumi.
But
he wasWSJ:
thenW
to be public
amake
second,
third
and
fourth.
ofrapid
privatizing
Japan’s
“However,
we have to take out piraUniversity
and
universities,
like Tokyo
University,
should
to the heavy
spending
of the
past.
active
oneLDP
of the
world’s
biggest
fiMr. Takenaka
theseifcould
make
aprivatized
sadport
talefor
of
awhose
man
who
was
farmers.
Since
then,
some
leadbuffeted
by problems
with his appointees.
His r
office,
deposit
nhas
they happen to come.”
Mr. says
Koizumi’s
bepost
and
encouraged
to compete
Take
nancial
managed more
effectively
an rapid rise and fall born
to top
lead
but didn’t
ers
have
indicated
thatthe
they
like tosystems.
see situation
point
taxexamples
policy
resigned
afterMr.
being
WSJ: man
What
are
of proand
insurance
armshave
make
it would
Mr.byAbe’s
onetime
ecowith
international
universities.
“The
of on
smaller
businesses
and
national
Mr.
Takenaka,
56
years
old,
pendent
agency,
in
the
way
that
gumption
for
high-level
politics.
nzo
Abe announcing
his
resignation
yesterday.
more
done
about
this—raising
the
possibility
caught
living
with
a
mistress
in
a
governmentactive
reform?
one
of
the
world’s
biggest
fimake
a
sad
tale
of
a
man
who
was
nomics minister,
“To implement these steps, we need a
the regions isn’t so good, so we need to
stitution
left theof government
in late
apore and South Korea
do.toAnd,
grandson
of Nobusuke
Kishi,public
a
of asystems.
return
to the heavy
spending
the what
subsidized
apartment.
The health minister,
Mr. Takenaka:
One
is privatizing
nancial
born
lead but didn’t have the Theleader
says Japan
needs
who
has a strong
ability to concepthink
to do about
this,”
Finance
[the w
2005 and has returned
to
his
ays, Japan’s big public
universi-for high-level politics. prime minister
in the late
1950s,
Mr.
past.
Hakuo
Yangisawa,
offended
women
by calling
national
universities
to
create
inMr.
Takenaka,
56
years
old,
gumption
proactive steps
tualize and implement,” he says. But he
Minister Fukushiro Nukaga told The Wall
Ha
academicand
careerthem
at Keio
UniTokyo
University,
should
by working
as
“The
situation
of smaller
businesses
clike
books,
which
he believes
can beofa Nobusuke
big
“birth-giving
His firstlike]
farm
stitutions
that can machines.”
compete with
left thepolitics
government
in
late
The grandson
Kishi, a Abe entered
to
prepare
its
says
none
of
the
candidates
for
Mr.
Abe’s
Street
Journal
in
an
interview
last
week.
the
regions
isn’t so
good,
need to think
for
Japan to
influence
the
world.
minister
came
fire for a series ofother
fund-is
in Tokyo.
alsounder
rivatized
and
encouraged
to in the late 1950s, Mr. an aide
to his
father,
former
foreign
[the He
world’s
top universities
2005
and
has returned
to hisso we versity
prime
minister
economy
for include
successor
have
this
desire
orUniability. Minister
“Loswhat
to
do
about
this,”
Finance
Fukuther with
leading
candidates
formerby working as minister
ing
scandals
and
committed
by
agency
serves as
an adviser
toHarvard
privatepete
top
international
uni- politics
Shintaro
Abe.
After
his
falike]
andthen
Princeton.
An- suicide
academic
career
at
Keio
Abe entered
the
future.
ing
momentum
in1993
reform
would
have
asector
A in
government
outline
for
nextministers
shiro
Nukaga
told
The
Wall
Street
Journal
nce
minister
Sadakazu
Tanigaki,
who
hanging.
The next
two
farm
reHeizo
Takenaka
foreign
concerns.
Mr. Takenaka
ities.
ther
died,
Mr.
Abe
in
took
over
other
isbudget
creating
an
independent
versity
in
Tokyo.
He
also
an For
aide
to his62,
father,
former
foreign
Taro
Aso
example,
he
says,
negative
impact
onprivatethe economy.”
foramid
trimming
public-works
an
last
week.
rs
increase
in
Japan’s
5%Shintaro
consumpsigned
allegations
of financial
Liberali
spoke to year
Yukacalled
Hayashi
at
To an
implement
these
steps,
we
seat
in
Parliament.
agency
to The
manage
Japan’s
huge irregularserves
asinterview
an adviser
to
minister
Abe. After his fa- his huge,
Tokyo’s
two
interspending
byfollowing
3%reserve
from Mr.
this
year
-- aportant. [Unlike ai
A
government
budget
outline
for
next
year
tax
to
reduce
the
national
debt.
Another
ity.
Heizo
Takenaka
foreign
more
effectively.
sector
concerns.
Mr.
Takenaka
ther
died,
Mr.
Abe
in
1993
took
over
Wall
Street
Journal
Abe’s
a leader
who
has
a
strong
abilHe
later
took
up
the
cause
of
famTaro Aso
national
airports
However,
cuts
continuation
ofdamaging
Mr. airports
Koizumi’s
policy.
for trimming
public-works
spending
byannouncement.
contender,
foreign
minister
NobuMost
wasisMr.
Abe’s
to
Liberalizing
also
im- reaction
spokecalled
topublic-spending
Yuka
Hayashi
Theare widely
his
seat
in Parliament.
where
aviation
resignation
oible
conceptualize
and
implement,”
he
says. ilies whose relatives
had
been
abductedat
from
should
be allowed
to
open
around
the
believed
tofrom
have
caused
income
disparity
But
latest
outlineofin
--the
approved
afterrecords.
this
year—a
continuation
Koi- the
Machimura,
62,
education
the
discovery
lostcountries
pension
Mr.
portant.
[Unlike
airports
other
Wall
Street
Journal
following
Abe’sof Mr.
He later
took
uprethe
cause
of fam- beaches
Haneda
and Narita
he
says none
ofsupports
the
candidates
for
Mr.
Japanese
by3%
North
Korean
agents
and Mr.
policy.
But
the
latest
outline—apreviveilies
patriotism.
Yasuo
71,abducted
Abe
calmly
said
problem
wouldcan’t
be looked
clock
to this
boost
theFukuda,
city’s
economy.
Thefrom
provincial
Japan
and
big WSJ:
citthe
LDP
lost
the
election
where
aviation
isupper-house
more
deregulated]
announcement.
esto
says.
whose
relatives
had
Why
did
Mr.
Abe
decide
tothe
resign?
ports]
stay o
successor
have
desire
or been
ability.
forced
to livebetween
inresignation
the zumi’s
North
for
more
than
20the
proved
after
the LDP
lost
theexploited
upper-house
elecong
stressed
the in
need
for foreign-currency
good
relations
into
without
providing
the
reassurances
peoHaneda
Narita
[Tokyo’s
two
main
or
Japanese
beaches
by
North
Korean
agents
country’s
vast
ies. Koizumi,
In the
July
election,
the
DPJ
-- alsoand
allowed
ministries
totoincrease
Mr. Takenaka:
Mr.
Abe’s
resignation
is airhugely inconve
ingMr.
momentum
reform
would
have
a reserves
years.and
Under Mr.
he
helped
engineer
tion—also
allowed
ministries
to day
increase
budand
South
ple
wanted.
WSJ:of
Why
didto
Mr.
Abe decide
ports]
can’t
stay
open
hours a day.why
ThisTokyo can’t
ability.
forced
toKorea.
livethe
in economy.”
the North for morethe
than
20 of some
was
a huge
surprise
for24
everyone.
,China
negative
impact
on
return
these
Japan,
some-to resign?
get
requests
revitalizing
any Japanese
Mr. are
Koizumi,
YukaAnd
Hayashi
and
Andrew Morse
Takenaka:
Mr.for
Abe’s
to- and
is “imhugely inconvenient.
this explains
have
a public-spending
years.would
Under like
Mr. cuts
Koizumi,
he helpedthing
engineer
The
abruptness
of the —
announcement
hub.
owever,
widely
that madeMr.
him
hugely
popular
andresignation
pre- regions
proving
stability
of
livelihood.”
oved
return.
But
whenincome
leftdisparity
office
contributed
to this article.
day
a huge
surprise
forpeople’s
everyone.
why
can’t become
Asia’s
.”
the
return
ofhesome
of
theselast
to
someshows
just Tokyo
how abnormal
things
havefinancial
to have
caused
be-Japan,
pared
the way for
hiswas
ascent
tothe
prime
minister.
The abruptness
the announcement
hub.
widely
thing
that made
himbig
hugely
and
prebecome
for Mr. Abe. The biggest reason WSJ: Does Japan h
n provincial
Japan
and the
cities.popular
In
Mr.
Abe started
well, visitingofChina
and
shows
just how abnormal
things have
ty bepared
theDPJ
wayexploited
for his ascent
primeSouth
minister.
for the resignation was that Mr. Abe’s continue to push f
July
election,
the
this to
conKorea, where
he improved
ties that had
Does Japan
have
a politician who
can
become
for Mr.
The biggest
In
Mr. Abe started
well, visiting
and
Mr.
Takenaka: To
healthWSJ:
conditions
have
deteriorated
,ies.
promising
measures
such as income
sup- China
soured
under Mr.
Koizumi.
ButAbe.
he was
then reason
continue
to push
for reform?
for thewith
resignation
was that
sfor
conSouth
Korea,
where
he LDP
improved
that hadby problems
sharply
recently
in part
because of Japan needs a lead
farmers.
Since
then,
some
lead- tiesbuffeted
his appointees.
His Mr. Abe’s
Tofeeling
implement
these steps,
health
havebeing
deteriorated
e supsoured
under
Koizumi.
was then
ity to conceptual
stress.Mr.
Mr.Takenaka:
Abe was also
helpless
have
indicated
that
theyMr.
would
like toBut
see he point
man on tax
policyconditions
resigned after
Japan Mr.
needs
a leader
has
a strongvery
abil-hard to find
sharply
recently
in part becauseasofa leader;
Pe leadbuffeted
by problems
his appointees.
Aso,
[Tarowho
Aso,
secredone about
this—raising
the with
possibility
caughtHis
living with
a mistress
in a governmentity
to
conceptualize
and
implement.
It’s
stress.
Mr.
Abe
was
also
feeling
helpless
to
see
point
man
on
tax
policy
resigned
after
being
now.
Ourresigns,
best cha
tary-general of the
Liberal
Democratic
return to the heavy public spending of the subsidized apartment. The health minister,
n July
3: Defense
Minister Fumio
Kyuma
hard
to left,
findafter
someone
like
that
right
as offended
a leader; women
Mr. Aso,by[Taro
Aso, secreibility caught living with a mistress in a governmentwho
has the
Party] very
is fully
in control
of
his
party.
Mr.
provoking
an
outcry
by saying
thepoten
Hakuo Yangisawa,
calling
now.
Our
best
chance
is
to
find
someone
tary-general
of
the
Liberal
Democratic
of
the
subsidized
apartment.
The
health
minister,
1945chief cabinet secto be a great lead
Yosano [Kaoru Yosano,
The situation of smaller businesses and them “birth-giving machines.” His first farm
thecharge
potential
transform
himself
Party]fire
is fully
control
his party. retary]
Mr. who
Hakuo
Yangisawa,
women minister
by callingcame under
U.S. atomic
bombing
of two
Japanese
Koizumicities
would be
hashas
taken
of to
his
cabinet.
egions isn’t
so good,
so we offended
need to think
for ainseries
of of
fundleader. Nobody
Mr.
Yosano [Kaoru Yosano, chief cabinet sec- to be a great“couldn’tbe
es and them “birth-giving machines.” His first farm
helped.” thought
when
he was a yo
t to do about this,” Finance Minister Fuku- ing scandals and
then committed suicide by
retary] has taken charge of his cabinet. Koizumi would be a great leader one day
think minister came under fire for a series of fundWSJ: What doesnMr.
Abe’s
o Nukaga told The Wall Street Journal in hanging. The next two farm ministers re29: Mr.resignation
Abe’s coalition loses its upperwhen he wasJuly
a young
politician.
Fuku- ing scandals and then committed suicide by
Is there
mean for the economy?
nterview last week.
signed amid allegations of financial irregularhouse majority in its first bigWSJ:
electoral
test, any
WSJ: What does Mr. Abe’s resignation
rnal in hanging. The next two farm ministers reMr. Takenaka: Among
thebycandidates
return
as prime m
government budget outline for next year ity.
voters
by
the
WSJ: Is therepunished
any chance
Mr.angered
Koizumi
willscandals,
mean for the economy?
signed amid allegations of financial irregularMr.
Takenaka: No
mentioned as his successor,
there isn’t
d year
for trimming
Most damaging
was Mr. Abe’s reaction to
gaffes
and bungling
of pension
records.
Mr. Takenaka: Among the candidates return as prime
minister?
xt
ity. public-works spending by
forAkagi,
Mr. Koizumi,
b
anyoneMr.
who
will carry
on1:the
reform
rom
this year—a
of Mr.
the discovery
ofmentioned
the lost pension
Mr.there isn’t
n Aug.
Farm
Minister
Norihiko
who
Takenaka:
Not
possible.
Ipolcan’t
speak
as his records.
successor,
ing by
Mostcontinuation
damaging was
Mr. KoiAbe’s reaction
to
him
for five
icy pursued
byKoizumi,
Mr. Koizumi
Mr. Abe.
i’s
policy.theBut
the latest
Abe calmly
the problem
would
beon
looked
succeeded
Mr.
Matsuoka,
resigns
amid
mediayears
for Mr.
but Iand
worked
closely
with
who will
carry
the reform polr. Koidiscovery
of theoutline—aplost pension records.
Mr. saidanyone
thinking. It’s si
We have
bunch
of candidates
who
ed after the
LDP
lost the
upper-house
without providing
the reassurances
peoreports
of
a financial
scandal.his
him afor
five years,
and
I am familiar
with
icy pursued
by Mr. Koizumi
and Mr. Abe.
e—apAbe
calmly
said
the problemelecwould into
be looked
n May 28: Farm Minister Toshikatsuwant
Matsuoka,
the re
to
change
thisIt’s
and undo not
thathis
in style
re- todown,
—also
ministries
to increase
bud- ple wanted.
his
thinking.
step give
We have a bunch of candidates who
e elec-allowed
into without
providing
the reassurances
peon Aug.simply
27:
Mr.
Abe
shuffles
his
cabinet,
right,
under
fire
for a series
of funding scandals,
hangsThere would be a huge negathen
come
back.
form
policy.
equests
for
revitalizing
regions
and
“im—
Yuka
Hayashi
and
Andrew
Morse
to someone
else
and
want to change this and undo that in re- down, give the
e bud- ple wanted.
and rein
LDP leadership,
opting
for several
himself.to this article.
the stability of—Yuka
people’s
livelihood.”
contributed
form
policy. There
would be a huge nega- then come back.
ding
“imHayashi
and Andrew Morse
experienced “old hands,” in a bid to regain
n June 15: Mr. Abe’s support rate falls below
ood.”
contributed to this article.
public confidence in his administration.
30%—seen by many analysts as a crisis level—for
the first time since taking office.
n Sept. 3: Farm Minister Takehiko Endo resigns
over illegal dealings at a farmer’s group he
n July 3: Defense Minister Fumio Kyuma resigns,
left, after provoking an outcry by saying the
n July 3: Defense Minister Fumio Kyuma resigns,
1945
left, after provoking an outcry by saying the
U.S. atomic bombing of two Japanese cities
1945
“couldn’tbe helped.”
U.S. atomic bombing of two Japanese cities
“couldn’tbe helped.”
n July 29: Mr. Abe’s coalition loses its upper-
n July 29: Mr. Abe’s coalition loses its upperhouse majority in its first big electoral test,
house majority in its first big electoral test,
punished by voters angered by the scandals,
punished by voters angered by the scandals,
gaffes and bungling of pension records.
gaffes and bungling of pension records.n Aug. 1: Farm Minister Norihiko Akagi, who
n Aug. 1: Farm Minister Norihiko Akagi, who
succeeded Mr. Matsuoka, resigns amid media
succeeded Mr. Matsuoka, resigns amid media
reports of a financial scandal.
May 28: Farm Minister
Matsuoka,
reports Toshikatsu
of a financial
scandal.
n Aug. 27: Mr. Abe shuffles his cabinet, right,
oka,
nder fire forna series
of Mr.
funding
scandals,his
hangs
Aug. 27:
Abe shuffles
cabinet, right,
and LDP leadership, opting for several
,mself.
hangs
and LDP leadership, opting for several experienced “old hands,” in a bid to regain
une 15: Mr. Abe’s
support rate
below
experienced
“oldfalls
hands,”
in a bid to regainpublic confidence in his administration.
w
0%—seen by many
analysts
as a in
crisis
level—for
public
confidence
his administration.
n Sept. 3: Farm Minister Takehiko Endo resigns
vel—for
he
first timensince
taking
office.
Sept.
3: Farm
Minister Takehiko Endo resigns
over illegal dealings at a farmer’s group he
over illegal dealings at a farmer’s group he
headed. Another
new appointee,
Parliamentary
Secretary for
Foreign Affairs
Yukiko Sakamoto,
quits after a
campaign office in
her constituency
misreported
financial outlays.
n Sept. 12: Mr.
Abe says he will
resign.
Photos: AP
Sources: Reuters;
WSJ reseach
Understand more about business
17
Abe’s exit may imperil Japan changes
Continued from first page
T H E WA L L ST R E E T J O U R N A L .
THU
weighed hopes surrounding a replacement
for Mr. Abe. The Nikkei Stock Average of 225
companies edged lower on the news because
of the political uncertainty. The yen was relatively unchanged at about 114 to the dollar.
The immediate cause of Mr. Abe’s downfall was a series of difficulties that showed
him not to be in charge. The government was
discovered to have lost 64 million national
pension records, which led many Japanese
to worry about how they would live after retirement despite having paid into the national pension system all their working lives.
Several of his ministers were caught up in
small-scale scandals related to questionable
expenses and political donations.
Until the early 1990s, when Japan’s economy was growing fast, strong political leadership wasn’t such an issue. But after the stockand-property bubble popped, the country
spent about a decade mired in troubles related to bad loans at banks and falling asset
prices. Now, Japan’s economic system needs
retooling so that fewer workers can generate
more output to support the growing elderly
population.
Mr. Koizumi was just what the country
wanted at the time: an aggressive, decisive
leader with a clear vision for an open economy, small government and assertive foreign
policy. He took office in 2001 vowing to transform the nation, and then fixed the banks’ bad
loan problems and slashed public spending.
Mr. Abe was chosen just under a year ago
to take over because he shared many of
Mr. Koizumi’s policy views. But he lacked the
political skill to execute big policies, and appeared soft and irresolute. Even his reaction
to the July election defeat has been indecisive. At first he said he would stay on, and on
Aug. 27 he announced a new Cabinet full of
veteran lawmakers, showing apparent determination to carry out his policies.
That soon looked impossible. Though the
ruling coalition’s lower-house majority
would be enough to overrule any objection Out of the picture: A man passes TV monitors in Tokyo displaying a live broadcast of Japanese Prime Minister Shinzo Abe announcing his resignation yesterday.
by the opposition-controlled upper house,
this process takes a couple of months, meaning the administration can’t act fast.
liament, hurrying his words nervously and al- served as Mr. Koizumi’s and then Mr. Abe’s comic books, which he believes can be a big
entered
politics
byminister.
working
antwo, Mr. Aso sup- way for Japan to influence the world.
And
timing was
crucial to
an anti- most
shouting out aMr.
to-doAbe
list for
the coming
foreign
Like as
those
budget
requests
forrenew
revitalizing
regions
terrorism
law
that
expires
Nov.
1
enabling
Jamonths.
ports Japan’s
strengthening
defense alliance
Other leading candidates include former
aide
to
his
father,
former
foreign
minister
and
“improving
the
stability
of
people’s
pan to supply fuel to U.S.-led forces fighting
Yesterday, he reversed course after the with the U.S.
finance minister Sadakazu Tanigaki, 62, who
Shintaro
Abe.
After
his
father
died,
Mr.
livelihood.”
in Afghanistan. The opposition Democratic DPJ leader refused to meet with him to dis“Even children know that if you cannot favors an increase in Japan’s 5% consumpParty of Japan disapproves, saying Japan’s cuss the law.
yourself,
it’s wise to get along well tion tax to reduce the national debt. Another
Abe in 1993 took overprotect
his seat
in Parliaforces should only take part in overseas oper“This was a central pillar of the assertive with someone strong,” he wrote in a book possible contender, foreign minister NobuFurther
accusations
come
ations
led by the
United Nations.of backsliding
foreign
policy that ment.
I support,” he said. “Ja- published in June. He favors deregulation taka Machimura, 62, supports education reOnfrom
Sunday,
Mr. Abe said he would “stake”
pan mustwho
continue its fight against terrorism and smaller government over tax and redis- form to revive patriotism. Yasuo Fukuda, 71,
financial-industry
participants,
his job
on the
antiterrorism
law,slowly
a statement
under aits
new primeHe
minister.”
later took up the tribution
cause ofpolicies.
families“If making an effort has long stressed the need for good relations
say
Japan
has
been
tightening
that was interpreted to mean he would quit if
The LDP will choose a new leader over the doesn’t generate differences in wealth, with China and South Korea.
whose
relatives
had been
abducted
from
regulation
of financial
markets
he failed
to push it through
Parliament.
The under
next week or so. The
overwhelming
favorite
fewer people
will make
an effort,” he wrote.
Many Japanese would like Mr. Koizumi,
following
he made
policy speech
in ParMr. Aso, 66, a former
justice minister
whoby And
Mr. Aso
is a big fan
of Japanese “manga” 65, to return. But when he left office last
Japanese
beaches
North
Korean
agents
Mr. day
Abe.
For aexample,
new
rulesis were
NEWS IN DEPTH
drawn up earlier this month to restrict
investment in defense-related companies
-- including
producers
of steel and batShinzo
Abe’s year
in power
teries. The rules require prior approval
subsidized
n Sept.
2006:
by26,foreign
investors wanting to buy
more
apartment.
Mr. Abe, pictured
than
10% of a company in a defense-reright,
becomes
n Dec. 27: The
prime
minister
lated
industry.
minister for
and forced to live in the North for more
than 20 years. Under Mr. Koizumi, he
helped engineer the return of some of
these to Japan, something that made him
hugely popular and prepared the way forresignation. Mr.
Yanagisawa apologizes,
his ascent to prime minister.
keeps his job.
n April 13: A visit
with approval
administrative
Mr. Abe started well, visiting China and to Japan by Chinese
ratings of around
reform, Genichiro
Premier Wen Jiabao
South Korea, where he improved ties that
“These measures are far too broad60%.
Sata, quits
further thaws ties
n Oct.reaching
8-9: Mr. Abe and restrictive to be aimed
after questions
had soured under Mr. Koizumi. But he between the two
meets with
about financial
and boosts
was then buffeted by problems with his nations
solely at monitoring sensitive industries,”
leaders of China,
statements
Mr. Abe’s ratings.
appointees.
His
point
man
on
tax
policy
says
Kirby
Daley,
a
strategist
at
Socisecond right,
submitted
Mr. Wen’s trip is the
andete
South
Korea;
by a group of
resigned after being caught living with first by a Chinese
Generale’s
Fimat broker division.
improves ties
his political
since 2000.
a mistress in a government-subsidized premier
“There’s
another agenda behind this.”
frayed
by his
supporters.
n April 26-27: Mr.
predecessor,
Junichiro
Koizumi.
apartment. The health minister, Hakuo Abe travels to the
Mr. Daley
says
the change in attitude
n Jan. 27,has
2007:
n Dec.
21: Tax Commission
Masaaki out of Japan
Health Minister
Yangisawa, offended women by calling U.S. to meet with
driven
many ofChairman
his clients
to
Homma, resigns after media reports that he is
Hakuo Yanagisawa calls women “birth-giving
President George W. Bush at Camp David, right,
them
“birth-giving
machines.”
Hisas first
places
like
Singapore
and
Hong
Kong.
living with a mistress in an upscale governmentmachines” in a speech,
prompting
calls for his
his first U.S. trip
prime minister.
Financial-services minister Yoshimi
Watanabe hinted in a recent speech
that some activist hedge funds targeting
Japanese companies shouldn’t be allowed
to operate. “We want the Japanese market to be a pond that attracts fish from
around the world,” Mr. Watanabe said.
“However, we have to take out piranhas if
they happen to come.”
Mr. Abe’s rapid rise and fall make a sad
tale of a man who was born to lead but
didn’t have the gumption for high-level
politics. The grandson of Nobusuke
Kishi, a prime minister in the late 1950s,
18
farm minister came under fire for a series
of funding scandals and then committed
suicide by hanging. The next two farm
ministers resigned amid allegations of
financial irregularity.
Most damaging was Mr. Abe’s reaction to
the discovery of the lost pension records.
Mr. Abe calmly said the problem would be
looked into without providing the reassurances people wanted.
--Yuka Hayashi and Andrew Morse contributed to this article.
uss resolving the Korean
cease-fire even before
ngyang completes its nur disarmament, putting
ul at odds with Washington.
Japan’s Economy
Japan’s GCA joins push
to look abroad for growth
English teachers
an faces increased
isolation
at Japanese
school
Japan’s
GCA
joins
push
to
look
abroad
for
growth
more sanctions if it continBy international
Andrew Morse - 2 November 2007
to defy the
learn harsh lessons
munity, a U.S. official said.
7
7
TOKYO–The
purchase of a boutique
united in MarchBy
as Andrew
a Japan-based
comMorse
urkey’s foreign
minister
investment
Japanese
pany to be named GCA Savvian Group
YukarimergIwatani Kane
a militaryU.S.
incursion
into bank byBy
Buying overseas
And Yuka
TOKYO—The purchase of a bouspecialist
GCAHayashi Corp.
wouldn’t ers-and-acquisition
be an invasion
Numbers of deals of outbound
tique U.S. investment bank by JapaHoldings target
Corp. highlights a trend that
would specifically
cross-border mergers and
TOKYO—Fresh
outGCA
of and
college
nese
spehas developed
in the past several
years:
Savvian
aremergers-and-acquisition
hoping to benefit
dish guerrilla
bases.
acquisitions by Japanese companies
five
years
ago,
Sam
Gordon
bought
cialist GCAofHoldings
More will
Japanese
are buying
from a rise in acquisitions
foreign Corp. highhe U.S.’s Gates
visit companies
a one-way
ticket to Tokyo
for what
lights a trend
that
has
developed in
300
companies
overseas
to
spur
their
growth.
companies
by
Japanese
buyers
that
is
na next week, which should
sounded like a once-in-a-lifetime
Full
the about
past several
years: More Japadriven
by
concerns
fundamental
st trust between the counyear
YTD
adventure:
Exploring changes
Japan’s here.
ex- Many
neseJapanese
companies
are buying compaOn
Thursday,
Tokyo-based
GCA
said
companies
s’ militaries, Beijing said.
otic
culture
while
teaching
English
nies
overseas
to
spur
their
growth.
it would pay the equivalent of $780
have grown increasingly worried that
200
U.N. envoy
will return
to with San
at the
nation’s largest
language
Onmarket
Thursday,
GCA
million
in its deal
Franciscogrowth
in their home
willTokyo-based
slow as
nmar on Saturday to proschool. All it took to get the job was said it would pay the equivalent of
based Savvian LLC, a privately held
the country’s population shrinks. To push
e dialogue between the
a simple interview.
$780are
million
infor
itsways
deal with San
investment
bank that specializes in the
profit higher, many
looking
ernment and
opposition.
Now, the “extended field trip” Francisco-based Savvian LLC, a prihigh-tech sector.
to expand into markets overseas where
100
has abruptly come to an end. His em- vately held investment bank that
early 90,000
have
GCApeople
will pay
for
growth promises to be faster. To do that,
ployer, Nova Corp., has withheld specializes in the high-tech sector.
Somalia’sthe
capital
in recent
transaction
many Japanese
have decided
his salary since September.
Last companies
s after clashes
between
GCA awill
pay
for the transaction
with its
shares
they
needand
to acquire
local
firm.
week,
it
temporarily
shut
down
ernment troops
and Is0
with its shares and own 55% of the
and own
filed for court protection, following combined company. The firms will
’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07
ic insurgents, the U.N. said.
55% of the
“If
you
are
a
Japanese
company,
it
is
a government crackdown on its be united in March as a JapanSource: Dealogic
he Republic
of Congo suscombined
clear
are better growth opporbusiness strategy. With
$20that
left there
in based
be named GCA
ded international
adopcompany.
overseas,”
sayscompany
JonathantoAllum,
his bank account, thetunities
28-year-old
Savvian Group Corp.
s in the wake
of
a
scandal
The
a strategist
panies have bought 223 overseas
Mr. Gordon says he has
taken outat KBC Financial ProdGCA
Savvian
are hoping to
r an attempt
to send chilfirms
ucts. Mr. Allum said
thatand
in the
current
companies, up from 216 in the same
$300 in credit-card loans.
benefit from a rise in acquisitions of
n to Europe
from Chad.
will
environment
period a year before, according to
“At least, I have a big
fridge and it is “perfectly sensible” for
foreign
companies
by
Japanese
buya driverdata
of growth.
Still
others are
trying
Japanese
companies to be looking for
ri Lankan be
troops clashed
still have some food left
in it,” says
tracker
Dealogic.
The
total
ersto
that
is driven by concerns about
to get a value
foothold
in deals
countries
where
they
h Tamil rebels in two batforeignwith
companies
buy.
the soft-spoken Mr. Gordon
a
of
the
this
year
is
nearly
fundamental
changes
here.
Many
that left 32 people dead.
have little or no presence. Earlier this
Please turn to back page
Japanese companies have grown in- $11.6 billion. For the entirety of
year, Matsushita Electric Works Ltd. paid
So
far
this
year,
Japanese
companies
have
oods triggered by heavy
creasingly worried that growth in 2006, Japanese companies spent
$420 million for 80% of Anchor Electribought 223 overseas companies, up from
s killed 13 people in centheir home market will slow as the $51 billion buying 265 companies
Money & Investing
cals Pte. Ltd., a deal that gave it access to
216 in the same country’s
period a year
before,
Vietnam over two days.
population shrinks. To overseas. About $19 billion of that
the fast-growing
India
market.
according to data
tracker
Dealogic.
The are lookfigure comes
from
two big deals, inpush
profit
higher,
many
ush’s longtime aide retotal value of the
deals
this
year
is
nearly
cluding
Japan
Tobacco Inc.’s
ing for ways to expand into markets
ed as U.S. undersecretary of
GCA
hopes
that
by joining
forces
withU.K.’s
$11.6 billion. Foroverseas
the entirety
ofgrowth
2006, promises
$14.8
billion
purchase
of the
where
to
e after two years of mixed
How Bear StearnsJapanese
CEO companies spent $51 billion
Savvian,
it
too
can
ride
that
trend.
Many
Gallaher
Group
PLC.
be faster. To do that, many Japaults in the position. Page 8
handled summer crisis
companies
may
want access
buying 265 companies
overseas. have
About
nese companies
decided Japanese
they
The growth
in outbound
acquisied: Paul Tibbets, 92, Amerproducts
and services
$19 billion
figure
comes from
two
raises concerns > Page
17 of that
need
to acquire
a local
firm. to the innovative
tions marks
a turnaround
for Japapilot and commander of
many ofnese
Savvian’s
clients have
developed,
big deals, including“IfJapan
Tobacco
Inc.’scompany,
companies,
which
had reyou
are
a
Japanese
B-29 that dropped an atomic
as well as
a presence
in the markets
giant U.S.
$14.8 billion purchase
of thethat
U.K.’s
Gal-are better
treated
from global
after a
it is clear
there
mb on Hiroshima, Japan.
market,series
it says.ofInhigh-profile
turn, many of
those
laher Group PLC.
acquisitions
growth opportunities overseas,”
small U.S.
companies
could
benefit
says Jonathan Allum, a strategist
in the
late 1980s
and
early from
1990s.
ditorial&Opinion
the resources
Japanesecompanies
compaThe growth in outbound
acquisitions
at KBC Financial
Products. Mr.access
Al- to
Back
then, Japanese
nies often
have.nationalist concerns in the
marks a turnaround
for Japanese
lum said
that in thecomcurrent environraised
llar Ben
panies, which had
retreated
from global
ment
it is “perfectly
sensible” for U.S. after a string of trophy purweek’s Fed rate cut could
“Withinchases
10 years,
we areinaiming
to bemarkets after a Japanese
series of high-profile
companies to be looking
resulted
American
icons,
y a steep price tag.
biggest independent
firmin
acquisitions in the
1980s
and earlyto buy.come the
for late
foreign
companies
e 12
including
Rockefeller M&A
Center
in the world,” Please
Akihiroturn
Watanabe,
one
1990s. Back then, Japanese
companies
So far this
year, Japanese comto page 28 of
GCA’s founders, said at a news conferraised nationalist concerns in the U.S. afence to announce the deal. Through the
ter a string of trophy purchases resulted
acquisition, GCA wants to increase the
in American icons, including Rockefeller
proportion of overseas deals it does to
Center in New York and movie studios
70% from the current level of 30%.
Columbia Pictures and MCA Inc., coming under Japanese ownership.
Savvian advises on mergers and acquiNow, Japanese purchases overseas tend
sitions and initial public offerings for
to be more pragmatic and low-key. As
high-tech companies. The company has
Japan’s big car companies expand overadvised on more than 100 transactions
seas, their suppliers have bought foreign
with a total value of more than $15 billion
companies in the same markets so that
since its inception in the fall of 2003.
they can maintain their relationships.
Last year, Nippon Sheet Glass Co.,
Established in April 2004, GCA has develwhich makes windshields and other glass
oped a strong track record because of its
products used in cars, spent $3.8 billion
independence. In October 2006, it went
to buy U.K. glassmaker Pilkington PLC,
public at 235,000 yen ($2037) a share and
acquiring that company’s global faciliquickly rose to more than one million yen
ties.
amid enthusiasm over the M&A market.
Though the stock price has come down
Other Japanese companies are
since, GCA stock trades at slightly less
making acquisitions to gain key
than three times its debut price. Thurstechnology. Toshiba Corp. led a
day, shares spurted 11% higher to 661,000
consortium that bought Westyen.
inghouse Electric Co. because
the electronics giant believes
that nuclear power will be
Missing in action?
Understand more about business
19
Japan’s Economy
Japan
Wider export focu
By Sebastian Moffett - 5 November 2
Tokyo–JAPAN’S GROWTH is
on exports -- and the corporat
manufacture those exports. Th
now, as the possibility looms o
down in the U.S., for decades J
market.
Japan could be partially insula
shift in its trade relations. Tho
pendent, Japan’s economy is le
than before. In 2000, 30% of J
the U.S. This year only 20% wi
its exports to China, including
first time.
This trade shift means that if t
goes bad, growth for Japan “w
cult but not catastrophic,” say
economist Richard Jerram.
The effects are likely to be see
government announces gross d
widest measure of economic a
September quarter. Flat consu
a sharp fall in housing investm
domestic demand to shrink, ec
ports -- led by those to the res
than made up for this, to prod
annualized growth.
How Japan makes it through a
and its global knock-on effects
term economic health of the w
economy. A fallback into the r
Japan until 2001 would mean i
ishing an important contributi
Longer term, with Japan’s pop
porations need to get a bigger
from overseas in order to cont
Japan’s major auto makers los
mestic market, even as they de
the U.S.
20
NLOOKSBEYOND53
USMAYSHELTERECONOMY+OMATSU£S!SIAEDGE
SINCREASINGLYDEPENDENT
TEINVESTMENTNEEDEDTO
HATCOULDBEAPROBLEM
OFANECONOMICSLOW
*APANkSBIGGESTEXPORT
ATEDBYALONGTERM
OUGHSTILLEXPORTDE
ESS53DEPENDENT
*APANkSEXPORTSWENTTO
ILLPROBABLYLESSTHAN
G(ONG+ONGFORTHE
THE53ECONOMYALONE
WILLBECOMEMOREDIFFI
YS-ACQUARIE3ECURITIES
EN.OVWHENTHE
DOMESTICPRODUCTTHE
ACTIVITYFORTHE*ULY
UMERSPENDINGPLUS
MENTPROBABLYCAUSED
CONOMISTSSAY"UTEX
STOF!SIALIKELYMORE
DUCESOMETOOF
APOSSIBLE53DOWNTURN
SISCRUCIALFORTHELONG
WORLDkSSECONDLARGEST
RECESSIONSTHATDOGGED
ITIMPORTEDLESSDIMIN
IONTOGLOBALGROWTH
PULATIONFALLINGITSCOR
SLICEOFTHEIREARNINGS
TINUEGROWING!LREADY
SEMONEYINTHEIRDO
EVOURMARKETSHAREIN
!BIGREASON*APANkSEXPORTSHAVESHIFTEDAWAYFROM
THE53ISTHAT*APANkSINDUSTRIALSTRENGTHSFITNEATLY
WITHTHEDEMANDFROMFASTGROWINGECONOMIESSUCH
ASMACHINETOOLSTOKITOUTFACTORIESANDEQUIPMENTTO
CONSTRUCTROADSANDBUILDINGS
PARTSTHEENGINETHETRANSMISSIONANDTHEHYDRAULIC
GEARSWILLBEMADEIN*APANANDSENTTOOVERSEAS
ASSEMBLYLINES3OMETOOFTHEVALUEOFA+O
MATSUSHOVELMADEIN#HINAISEXPORTEDFROM*APAN
SAYS-R.OJI
+OMATSU,TDTHEWORLDkSSECONDBIGGESTMAKEROF
CONSTRUCTIONMACHINESAFTERTHE53kS#ATERPILLAR
)NCISONEOFTHE*APANESECOMPANIESMOSTDEPEND
ENTONOVERSEASMARKETSBECAUSECUTSINPUBLIC
SPENDINGHAVELEDITSDOMESTICSALESTOFALLDURING
THEPASTYEARS3UCHSALESAREDEPENDENTONBUILD
INGACTIVITYOVERSEASWHICHISALREADYBEINGHITIN
THE53BYTHEPROBLEMSINTHESUBPRIMEMORTGAGE
MARKET+OMATSUEXPECTSTHE.ORTH!MERICANMARKET
FORCONSTRUCTIONANDMININGMACHINESTODECLINE
TOTHISYEAR#ATERPILLARLASTMONTHREDUCEDITS
PROFITFORECASTFORTHEYEARBECAUSEOFSUCHMARKET
CONDITIONS
4HISKINDOFEXPORTMAKES*APANTHEONLYMEMBER
OFTHE'ROUPOF%IGHTLEADINGNATIONSTORUNATRADE
SURPLUSWITH#HINAINCLUDING(ONG+ONG
4HECONCERNFORTHE*APANESEECONOMYISTHATTHIS
ASWELLAS*APANESEEXPORTSTOOTHERCOUNTRIESMIGHT
BEBASEDONlTRIANGULARmTRADE)F53CONSUMERSSTOP
BUYINGGOODSMADEFOREXAMPLEIN#HINATHEN#HI
NESEINDUSTRYWONkTNEED*APANESEMACHINESTOBUILD
ANDEQUIPITSFACTORIES
4HESTAKESAREHEIGHTENEDFOR*APANBECAUSEEXPORTS
AREINCREASINGASAPERCENTAGEOF*APANESE'$0TO
THISYEARFROMFROMIN4HATMEANSTHAT
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*APANWILLBEMOREVULNERABLETHANEVER
+OMATSUkSPRESIDENTSAYSFALLING53DEMANDWILL
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AND3OUTHEAST!SIAANDTHECOMPANYEXPECTSRECORD
SALESTHISYEARFOLLOWINGAINCREASEINREVENUE
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THEFISCALYEARENDED-ARCH)TS
EXPORTSTO!SIAARENOWVALUEDAT
Japan’s export growth
MORETHANTWICETHOSETOTHE53
l%VENIFTHE!MERICANMARKETFALLS
ITWONkTAFFECTOURPROFITSSOMUCHm
SAYS0RESIDENT+UNIO.OJI
Total exports
In trillions of yen
Komatsu sales of construction and
mining equipment,* in trillions of yen
¥80
¥1.5
60
+OMATSULIKEMANYOTHER*APANESE
MANUFACTURERSISPLANNINGFORTHE
APAN’S GROWTH is increasFUTUREBASEDONTHEPREMISETHAT
ingly dependent on exports—
THESECONDITIONSWILLCONTINUE
and the corporate investment
2ESEARCHANDDEVELOPMENTWILL
needed to manufacture those exSTAYIN*APANBECAUSETHATISWHERE
ports. That could be a problem
+OMATSUkSKEIRETSUISLOCATED
now, as the possibility looms of an
MAKINGITEASIERTOCOORDINATETHE
economic slowdown in the U.S., for
DESIGNOFNEWMACHINESANDTHEIR
decades Japan’s biggest export
MANUFACTURE)NADDITIONMAIN
Overseas
Japan
1.0
40
0.5
20
0
0
2002
2003
2004
2005
2006
1995
2000
2005
*Komatsu's other revenues come from industrial equipment and electronics
Sources: Japan’s Ministry of Finance; Komatsu
Understand more about business
22
Understand more about business
23
r put his coffee shops on the map
ered a newly popular type of coffee
p. The coffee was more flavorful
n any he had tasted, and the presenon more fashionable than in Japan,
Matsuda recalls in his Japanese-lange book, the title of which trans26 FebruaryBegins
2007 With a Cup
s as “Everything
offee.”
uro Osawa spoke with Mr. Matsuda
When Kouta
okyo.
The Interview: Managing in Asia
ship.” The idea that early struggles
help you grow stayed with me, and
later as an adult I became a person
who is willing to take on challenges.
hires?
Mr. Matsuda: I want each of them to
come with a clear aim. Work can be really dull if you don’t know why you are
doing it. As long as the purpose is
clear, I welcome people who want to
use their experience at Tully’s simply
as a step for their goals to be achieved
elsewhere.
Entrepreneur put his coffee shops on the map
Chief of Tully’s in Japan led chain at every stage; notable rival to Starbucks
WSJ: What was the toughest decision
you’ve had to make?
Mr. Matsuda: It was the decision on the
location of the first Tully’s store in JaJuro
Osawa
spokeawith
Mr.
Matsuda in
one starting out in your field today?
pan.
After
I made
three
milMatsuda quit his
Tokyo.
lion yen ($25,000) initial payWSJ: WhatMr.
areMatsuda:
the mostToimportant
at- a foodjob at a leading
those starting
ment
for
a
place
I
found
in
HiJ: What was
your
first
job
tributes
of
a
good
manager?
Japanese bank a
WSJ: What was your first job and what
retail business from scratch, I would say
roodid
[a itdistrict
in Tokyo], anwhat diddecade
it teach
Mr. Matsuda:
First,experience
you need working
to have at
a your own
agoyou?
to sell
teach you?
get some
other place became available
Matsuda:lattes
When
I lived
in
clear vision.
YouIfset
targetsthe business
and
cappucstore.
thespecific
person starting
in Ginza.
Ginza When
was the
dis-in Lexington,
ngton, I worked
as amight
newsbased Ion it.
Second,
you
to be
cinos, some
Mr. Matsuda:
I lived
only
provides
thehave
capital
and doesn’t get
trict
I firstashad
in mind boy
when
I ablethe
er boy delivering
the Bosto communicate
thestore’s
visioneveryday
to the operahave questioned
worked
a newspaper
delivering
involved in the
came
up with
to open
Globe forthe
two
years,
startcareer
move.
Boston
Globethe
forplan
two years,
starting
in the youtions,
business
most the
likely fail.
people
workthe
with.
Just will
sharing
Tully’s
if I wanted
to I delivin the final year of elemenfinal here.
year ofBut
elementary
school.
working
at the
won’t listen to
vision isn’tPeople
enough.
Within
thestore
organiapply
new
I had
school. IBut
delivered
the paMr. Matsuda,
eredfor
thethe
paper
to place,
60 or 70
households
a topminds
manager
who
visits them and
zation all the
have
torarely
resonate
nowhouseholds
38 years oldby
by bike.
up at
5 every morning
cannot
do
any
of
their
work.
This is why
to give
up Getting
the three
million
to 60 or 70
with one another. To this end, frequent
the5chief
hard,
especially
the middle of
by some
Japanese trading
yenwas
I had
paid
for theinother
e. Gettingand
up at
every
dialogue isattempts
essential.
I findmajor
it particuof Tulwinter.
I remember
to afwork inlarly
a effective
companies
operate
food chains in the
place.
I was
already going
in debt
ning wasexecutive
hard, especially
to talktowith
employees
Kouta Matsuda
snowstorm
and to
even
the truck that
past were not successful, even though
terheavy
raising
the capital
start
he middlely’s
of Coffee
winter.Japan
I reoutside official settings, having dinners
Co.,
never
was
supposedAnd
to bring
all the bundles of
they had plentiful resources and strong
this
business.
it wasn’t
mber going
tohas
work
in a
or drinks
them. It is on those occashied
away
from
papers
for
us
to
deliver
couldn’t
make
it in with
networks.
100% certain that the Ginza place
vy snowstorm and even the truck
sions
that
they
really speak their
challenges.
As a young
time.
job not only
made
me physiif The
we applied.
There
was
t was supposed
to bring
all theentrepreneur,
bun- would be ours
minds.
have
belook
passionhe almost single-handedly persuaded
cally stronger but also taught me how
to Third,
WSJ:you
What
doto
you
for in new hires?
of papers for us to deliver couldn’t a risk of losing both. Ginza’s rent was
ate
about your project. Even if there
executives at Tully’s Coffee Corp. in the
keep up with a demanding schedule.
I also
higher but it
hadamore
potential,
ke it in time.
not
only
are peopleMr.
more
skilledI and
U.S.The
to letjob
him
open
itsmade
first Japanese
made
little money
as a as
kidthe
by mowing
Matsuda:
wanttalented
each of them to come
is moreneighbors’
vibrant than
the
physicallyshop,
stronger
butinalso
than
under
they
in Tokyo
1997,taught
under the area
Tully’s
lawns,Hiroo.
sellingIn
lemonade,
hold-you working
with a clear
aim.you,
Workif can
be really dull
how to keep
up The
withJapanese
a demanding
end, I went ing
forathe
bigger
more
passionate
brand.
company contingarage
sale,challenge
and so on. If kidsknow
grow-that ifyou
youare
don’t
know
why you are doing it.
and
edule. I also
a and
littletomoney
as to
uedmade
to grow
pay royalties
thechose Ginza.
ing up in Japan tried to do that, parents
As about
long asthe
the business,
purpose is they
clear, I welcome
than anyone
d by mowing
neighbors’
lawns,
American
company
until,sellin 2005, Tully’s
or schools would probably stop them
and
people
want
to use their experience
will
support
and who
follow
you.
Coffee
Japan
purchased
for $17.5 WSJ:
million
themwould
off, but
it wasn’t
unusual in the
at Tully’s simply as a step for their goals
What tell
advice
you
give somelemonade,
holding
a garage
sale,
think
I owe
mytoday?
entrepreneurship
bemarket
achievedfor
elsewhere.
one startingU.S.
outI in
your
field
so on. If the
kidsSeattle-based
growing up company’s
in Japan trademarks
WSJ: Withto
the
coffee chains
and other
intellectual-property
assets
for
partly
to those
early experiences.
Mr. Matsuda:
To those
starting
a foodd to do that,
parents
or schools
in Japan so competitive, how do you
Japan.
What are the most important atretail business from scratch, I would
uld probably
stop them and tell
continue toWSJ:
grow?
WSJ:
Who
gave
you
the
best
business
tributes
of a good manager?
say get some experience working at
m off, but it wasn’t unusual in the
Mr. Matsuda: Simply trying to sell
The
chain
now
has
about
300
retail
advice?
your own store. If the person starting
I think I owe my entrepreneurship
more product
is no longer
the
outlets across the country. It is one of
Mr. Matsuda:
First,
yousolution.
need to have a
the business only provides the capital
tly to those
early experiences.
with
customers
increasthe most recognizable rivals to Starbucks
Mr. Matsuda: As I was growing up,Connecting
my
clear
vision.
You setisspecific
targets based
get involved
in the
store’s
To thisyou
end,
public
Coffee Japan Ltd., which operatedand
665doesn’tfather’s
words were
very
influential.ingly
He important.
on it. Second,
have
to beconable to
J: Who gave
youas
the
business
everyday operations,
the business
willand often
cern aboutcommunicate
health may the
be one
ofto
the
outlets
of best
the end
of last year. Mr.
valued our cultural
traditions
vision
the people you
ice?
most likely quoted
fail. People
working
atand
theproverbs.
key terms.work
Fair with.
tradeJust
may
be another.
Matsuda has led the business through
Japanese
sayings
sharing
the vision isn’t
Matsuda:every
As I stage
was growing
up, my
store
won’tThey
listen
to a top
It may notenough.
be realistic
to the
useorganization
organic in- all the
of its growth,
including
workformed
my manager
general attitude toward
Within
er’s words
who rarely life
visits
cannot
ingwere
at thevery
shopinfluential.
in its early days. Tully’s
andthem
have and
supported
medo
throughout
my for
minds
have to resonate
one another.
gredients
everything
on thewith
menu,
Coffee
Japan
is now part
of the Foodx
career.
One of
the most memoraTo thishealth
end, frequent
dialogue
is essential.
valued our
cultural
traditions
and
any of theirbusiness
work. This
is why
attempts
but being more
conscious
allows
Co. holding
company,
which
ble quotes
was, trading
“When young,
should
it particularly
effective
n quotedGlobe
Japanese
sayings
and
bysince
some major
Japanese
com- one us
to shareI find
the same
concerns
as ourto talk with
November
owned
by Tokyo
be willing
to pay
money
to go through
official
verbs. They
formedhas
mybeen
general
attipanies to operate
food
chains
in the
customers.employees
Growing outside
up, most
of ussettings, having
Stock
Exchange-listed
Ito
En
Ltd.,
hardship.”
The
idea
that
early
struggles
dinners
or
drinks
with
them.
e toward life and have supported
past were not successful, even though
think what our parents cook for
us isIt is on those
Japan’s
top makercareer.
of green-tea drinks.
help youresources
grow stayed
with
me, and the
laterbest,
as because
occasions
thatare
theythe
really
speak their
throughout
my business
they had plentiful
and
strong
they
people
Neither
Foodx
nor
Tully’s
Japan
discloses
an
adult
I
became
a
person
who
is
willing
minds.
Third,
you
have
to
be passionof the most memorable quotes
networks.
we trust the most. Being in the food
financial results.
to take on challenges.
ate about your project. Even if there are
, “When young, one should be willbusiness, I’m
hoping to create that
people more skilled and talented than you
kind of trust.
to pay money
to go through
hardWSJ: What WSJ:
do you
lookwas
forthe
in toughest
new
Mr. Matsuda
has a multicultural
upbringWhat
decision
working under you, if they know that you
ing. He spent part of his childhood in the
African country of Senegal and school
years in Lexington, Massachusetts,
before returning from the U.S. to attend
Tsukuba University in Japan, where he
majored in international relations.
His business idea emerged during a short
visit to the U.S. for a high-school friend’s
wedding in 1995, when he discovered a
newly popular type of coffee shop. The
coffee was more flavorful than any he
had tasted, and the presentation more
fashionable than in Japan, Mr. Matsuda
recalls in his Japanese-language book,
the title of which translates as “Everything Begins With a Cup of Coffee.”
Born to run.
you’ve had to make?
are more passionate than anyone about
the business, they will support and follow
you.
Mr. Matsuda: It was the decision on the
location of the first Tully’s store in Japan.
www.mercedes-benz.com
After I made a three million yen ($25,000)
WSJ: With the market for coffee chains
initial payment for a place I found in
in Japan so competitive, how do you conHiroo [a district in Tokyo], another place
tinue to grow?
became available in Ginza. Ginza was the
district I first had in mind when I came up
Mr. Matsuda: Simply trying to sell more
with the plan to open Tully’s here. But if
product is no longer the solution. ConI wanted to apply for the new place, I had
necting with customers is increasingly
to give up the three million yen I had paid
important. To this end, public concern
for the other place. I was already in debt
about health may be one of the key terms.
after raising the capital to start this busiFair trade may be another. It may not be
ness. And it wasn’t 100% certain that the
realistic to use organic ingredients for
Ginza place would be ours if we applied.
everything on the menu, but being more
There was a risk of losing both. Ginza’s
health conscious allows us to share the
rent was higher but it had more potential,
same concerns as our customers. Growas the area is more vibrant than Hiroo. In
ing up, most of us think what our parents
the end, I went for the bigger challenge
cook for us is the best, because they are
and chose Ginza.
the people we trust the most. Being in the
food business, I’m hoping to create that
WSJ: What advice would you give somekind of trust.
24
echnology.
It’s no wonder that everything in the Mercedes-Benz SLR McLaren sounds
0km/h in 3.8 seconds. Carbon fibre composite structure. Adaptive airbags. Ceramic brake
hi recently in Tokyo.
customers' shoes, which could lead to
Interview:
ideas for newThe
services.
Then Managing
I go an- in
other six months without a Bears Lady,
so I can better understand how helpful
they are.
a lot of attention lately as the market
Asia
with the second best potential after
: Early on, how difficult was it to
the elder-care market. But it's a tough
customers?
business. Assume there are 100 customTakahashi: We were working
ers. All of them have families, life
nst the wind. When I told my
styles, and homes as different from one
nds that we were going to start the
WSJ: The Bears Co. Web site urges coranother as their faces. That means you
ness of outsourcing
porate customers to include your ser23 April 2007 housework,
need to provide a hundred different,
e of them understood what that
vice in their employee-benefits proyet reliable, services for customers. It's
But we believe it will be more com- gram. Where did this idea come from?
a lot of work to manage, supervise and
Yuki Takahashi,
would be terrible
hardworking
careerstaff.judge
someone
isn’t good
enough in one
n in the future
for ordinary
Ms.ItTakahashi:
It wasif my
idea. train
Business
margins
aren't
and
were doubly
stressed
with housearea of training we have the person take
men to getco-founder
married, have
Wewomen
are striving
to have
corpohigh, either. So, unless you have solid
and childrearing
jobs.
that part of the course again. We teach
dren and executive
also havedirector
a fulfillratework
customers
as well. on
A top of their
reasons fornot
choosing
this line
busi- agents and
of
Bears
Co.,
which
only knowledge
ofof
cleaning
career. It would be terrible
woman I interviewed for a job
ness,
your housekeeping
life will be full
of hardships.
provides
maids
So
I
made
the
rounds
to
enlighten
women.
skills
but,
just
as imporardworking career women
with us asked me if it would
Still, wetant,
would
like behavior
many people
tocompany
for busy Japanese
I distributed fliers, made speeches and
proper
and the
e doubly stressed
with
be accepted
OK if sheinterviews
continued
to work join our industry,
andabout
if you
concur
families, started
to say that outsourcphilosophy
hospitality.
sework and
childrearing
after
getting
married
and
havthe business with
ing housework is a necessary
tool for
with the way we do business, to copy
op of their
ingwomen
a babyto[Working
women in happy
herjobs.
husband eight
have a better-balanced,
What
youevgive someus. You canWSJ:
contact
us;advice
we'll would
disclose
o I made years
the rounds
Japan
leavethat
their
jobs a Bears
ago. Buttotoenlife. usually
I emphasized
having
one
starting
in
the
business
of
erything. We started this business to providing
ten women.
distributed
when
they
getonce
married].
Her a luxury or a
get Ithe
company
Lady
come
a week isn’t
householdnot
maids?
create an industry,
merely an indis, made speeches
and acwords
me think
that
off the ground,
she
sign made
of laziness.
Rather
it creates a feeling
vidual
shop.
We
wanted to
influence
first
had
to
chalof
security
that
can
make
a
woman
relate
Ms.
Takahashi:
The
industry is getting a
ed interviews to say that
companies need to provide emwomen's
new
sense
of
values
ways
lenge traditional
betternot
to her
husband,
children and
lot of attention lately and
as the
market with
ourcing housework
is a
ployees
only
with a her
good
of
thinking.
This
business
is
merely
a the elderYuki
Takahashi
Japanese
rejection
the
outside
world.
the
second
best
potential
after
essary tool for women to
environment for work but also
tool
for
that.
We
don't
want
to
see
the
of
hiring
others
to
care
market.
But
it’s
a
tough
business.
e a better-balanced, happy
for their family life so the comdo housework.
To a Bears
WSJ:
What isemployees.
behind Bears’ recentbusiness
rapid
Assume for
there
area100
customers.
prosper
only
few
years All of
I emphasized
that having
pany can keep
talented
them, maids are only for the rich, despite
growth?
themaway.
have families, life styles, and homes
and then fade
About 40 companies so far have
y come once a week isn't a luxury
Maid service hits home in Japan as customs bend
‘Outsourcing housework’ gains with career women, co-founder of Bears says
the fact that more women are entering
as different from one another as their
This tells
us making
how efforts to
sign of laziness.
the work Rather
force. it creates a signed up with
Ms. us.
Takahashi:
We’re
That means you need to provide a
Whatfaces.
was your
first job, and
fast society improve
and its every
senseday.
of values
arespendWSJ:
ng of security that can make a
We don’t
any
hundred different, yet reliable, services
what
did
you
learn
from
it?a lot of work to manchanging.
man relateMs.
better
to
her
husband,
Takahashi, now a 37-year-old
money on TV or magazine advertisfor customers. It’s
As a student,
I helped
children and
theofoutside
mother
two, hadworld.
previously lived in
ing; simply put, we can’t afford it. Ms.
Our Takahashi:
age, supervise
and train
staff. Business
out at fund-raising
events
at either.
an instiHong Kong, where she sold advertising
customers
introduce
us to new customers
margins aren’t
high,
So, unless you
WSJ: How do
you manage
so many
tute for thehave
handicapped
near
my par- this line of
a publishing
years.Ladies?
by word of mouth. Yet, we keep telling
solid reasons
for choosing
: What isfor
behind
Bears' company
recent for fourBears
Hundreds of thousands of womenMs.
from
ourselves
that we
good enough.
Beyour life
of hardships.
ents'
home.business,
They taught
mewill
notbetofull
shy
Takahashi:
We stake
thearen’t
company's
d growth?
Southeast
Asia
work
as
maids
in
Hong
ing
a
pioneer
in
the
industry
means
only
away
from
difficulties,
and
to
be
gratefuture
on
training
them.
The
training
Takahashi: We're making efforts to
Kong, and Ms. Takahashi employed a
that you started something new, not
wouldwe
likehave
manybeen
people to join
fulthat
for the Still,
goodwe
health
two to four weeks.
rove every
day. We don't spend any varies but averages
Filipina maid. Returning to Japan, where
you are changing for the better. given.
our industry, and if you concur with the
ney on TVhousehold
or magazine
advertising;
maids
were scarce, sheThere
foundare seven different kinds of trainway we do business, to copy us. You can
someone
good in the field,
ply put, we
can't afford
it.aOur
it difficult
to find
goodcusone, anding.
de-If we judge
We are
a leadingisn't
company
contact us; we’ll disclose everything. We
WSJ:
was the
business
ad- an industry,
enough in one
of training
haveto stay
ers introduce
to new
cidedus
to set
up a customers
company that supplies
andarea
we make
constantwe
efforts
thatWhatstarted
thisbest
business
to create
thatexample,
part of for
thesix
course
word of mouth.
wefor
keep
telling
trainedYet,
maids
working
wives. the person take
way. For
months I vice
use ayou ever
notgot?
merely an individual shop. We wanted
Ms.
When women’s
I was feeling
again. We teach
only
knowledge
of house
Bearsnot
Lady
once
a week at my
soTakahashi:
to influence
new sense of values
selves that we aren't good enough.
“Unless
people
understand
outthat Iand
can housekeeping
put myself in customers’down
shoes,as a and
ways of
This me,
business is
agents
student,
mythinking.
father told
ng a pioneer
in the
industry
meanswhat cleaning
sourcing
housework
is
and
what
it
is
for,
which
could
lead
to
ideas
for
new
services.
merely
a
tool
for
that.
We
don’t
want to
skills
but,
just
as
important,
proper
be"The
sun
rises
for
everyone
tomorrow,
that you started something new,
we wouldn’t
have
Bears,”and the
Then
I go another
six months without
a
see the businessyou're
prosperin."
for He
only a few
company
philosophy
whatever
circumstances
that you are
changing
forbeen
the able
bet- to sellhavior
said Ms. Takahashi. Her efforts, comBears Lady, so I can better understand
years
about hospitality.
explained to
meand
thatthen
thefade
onlyaway.
choice is
bined with Japan’s economic recovery
how helpful they are.
to
face
your
difficulties
and
then
move
We are a leading
company
in
the
and more working women, have rapidly
WSJ: What was your first job, and what
And even
good
things
d, and we expanded
make constant
efforts toindustry
WSJ:
would
the maid-service
in What advice
WSJ: The
Bearsyou
Co.give
Websomesite urgeson.
corpodid when
you learn
from
it? happen
to you,
that way.the
For
example,
forThe
sixJapanese one
startingrate
in the
business
of providpast
few years.
governcustomers
to include
your service
in move on and try to be even betnths I usement
a Bears
Ladythe
once
a week
household
maids?
ter rather than
being content.
expects
market
to moreing
than
their
employee-benefits program. Where
Ms. Takahashi:
As a student, I helped out
double from 54 billion yen ($455 million)
in 2000 to between 100 billion and 120
billion yen by 2010.
Bears Co. sales for the fiscal year that
ended in September doubled to 300 million yen from a year earlier. The company
now has 1,700 “Bears Ladies,” as its
maids are called, who receive up to four
weeks of training before they go on their
first jobs.
Miho Inada interviewed Ms. Takahashi
recently in Tokyo.
WSJ: Early on, how difficult was it to get
customers?
Ms. Takahashi: We were working against
the wind. When I told my friends that
we were going to start the business of
outsourcing housework, none of them
understood what that was. But we believe
it will be more common in the future for
ordinary women to get married, have
children and
a fulfilling
career.It has
matic transmission,
lessalso
fuelhave
means
more power.
did this idea come from?
at fund-raising events at an institute for
the handicapped near my parents’ home.
Ms. Takahashi: It was my idea. We are
They taught me not to shy away from difstriving to have corporate customers as
ficulties, and to be grateful for the good
www.mercedes-benz.com
well. A woman I interviewed for a job
health we have been given.
with us asked me if it would be OK if she
continued to work after getting married
WSJ: What was the best business advice
and having a baby [Working women in
you ever got?
Japan usually leave their jobs when they
get married]. Her words made me think
Ms. Takahashi: When I was feeling down
that companies need to provide employas a student, my father told me, “The sun
ees not only with a good environment for
rises for everyone tomorrow, whatever
work but also for their family life so the
circumstances you’re in.” He explained
company can keep talented employees.
to me that the only choice is to face your
difficulties and then move on. And even
About 40 companies so far have signed up
when good things happen to you, move
with us. This tells us how fast society and
on and try to be even better rather than
its sense of values are changing.
being content.
WSJ: How do you manage so many Bears
Ladies?
Smoothness to the powerMs.ofTakahashi:
seven.
We stake the company’s
future on training them. The training varies but averages two to four weeks. There
are
seven different
kinds
of training.
we
increased
acceleration
from
0 to 100 If
km/h
ed fuel consumption. The seamless shifts give the car more responsive performance and power while
nz, we design our cars so that your driving pleasure is never interrupted.
Unlike any other.
Understand more about business
25
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Understand more about business
potion to condiment that could
The Interview: Managing in Asia
1974. Thankfully, we were able to turn
of building our U.S. factory, what I
d more than 300 years ago by Mr.
the U.S. business around in a few years.
learned in business school definitely
gi’s ancestors in Noda, near Tokyo.
But that was probably the most diffihelped. Actually, if I hadn’t gone to
Mr. Mogi, now 72 years old, has alcult time for me. I knew I had to stabibusiness school in the U.S., I think it
ys been a maverick of sorts. From
would’ve been very difficult. And it beearly days with Kikkoman, he has
lize the situation, so we did a lot of recame even more useful after I took
hed himself and the company to
search. First, expanding sales was key.
29 October 2007
ture outside tradition and onto new over the entire company. They say that
At the same time, we had to stabilize
in two years of business school, you
hs, including the pivotal move in
prices, especially because inflation was
learn the equivalent
of 10 to
years
the inso
early 1970s
to build
its first overhigh then.
put a lotnamed
of thought
Kikkoman
Corp.
young Mr. Mogi
studyon
business
New
fromWe
a professor
Joel Dean. And
job.York.
YouInlearn
about
the
inters factory Chief
in theExecutive
northern
into
pricing,
and
it
took
about
a year
ormaking a
1961, he became the first Japathe advice he gave was that
when
nalnese
operations
company,
state of Wisconsin.
to adjust
them to
adequate
level.to be 100%
Yuzaburo Mogi
to receiveof
anaM.B.A.
from Newso
York’s
decision,
it’san
almost
impossible
as Columbia
well as the
decision-making
n many ways,
Kikkoman’s
remembers
the
University,
and he credits the
correct all the time. But even if it’s just
process.
So in
myshaping
experience,
in the U.S.
is tied
towhen
a deciWSJ:
wascorrect,
the most
de-full support
blank
stares
experience
with
his worldview
andWhat90%
you satisfying
need people’s
business
school of
has
certainly
n a decadehisearlier
by first
a
everto
made
as aa decision.
manager?
company
understanding
what
it would takecision
for you’ve
in order
execute
He wanted
proven
useful
time.
tookto
itsstudy
hallmark
Kikkoman
to over
succeed.
to use
what we
learned
ng Mr. Mogi
busiMr. Mogi: Iuswas
behind
thehad
idea
to in class to
soy he
make in
thethe
bestU.S.
decisions
possible and also
s in New product
York. In--1961,
build a factory
Up until
sauceJapanese
-- from Japan
Tomoko
spoke
with
at our overseas
to ensure that
we explain
our decisions
WSJ:
WhatHosaka
was your
first
jobMr. Mogi
ame the first
to
then,
operations
weren’t
across
the
Pacific
Kikkoman’s
Tokyo
office.
clearly
and
convincingly
to
others.
and what did you learn from it? profitable. But it was the U.S. factory
eive an M.B.A. from New
50 years
ago.
Mr. Mogi: It was right after we
k’s Columbia
University,
that proved to be the turning point.
WSJ:
Why
did you
decide
toin
attend busiWSJ: What setbacks have you experienced
first
began
selling
soy
sauce
he credits the experience
Most
Americans
ness
school
in
the
U.S.?
as a manager?
the U.S., and I worked as a soyh shaping his worldview
WSJ: How do you maintain tradition
at the time had
sauce demonstrator during my
understanding of what it
while at the
same time move forward
Yuzaburo Mogi
never seen, much
Mr. Mogi: I was in my second or third year
Mr. Mogi: The one that stands out was
summers
in
New
York.
For
exuld take for
Kikkoman
to
as
a
company?
less tasted, the redat Keio University [in Tokyo]. One of Peter
shortly after we opened our U.S. factory.
ample,
at supermarkets,
cook
ceed.
Mr. Mogi: We
300
years
history,
dish-brown potion
Drucker’s
books, called I’d
“The
Practice
Thenhave
the oil
shock
hit.of
We
fell deep into
meat flavored
with soy sauce,
cut
it up into
Tomoko Hosaka
spokeinwith
Mr.
so in that the
sense,
we1973
have
tradition.
YetThanknow a fixture
supermarkets,
restaurants
of Management,”
was
translated
red in
and
also in 1974.
into
and He
stick
toothpicks
in
gi at Kikkoman’s
Tokyo
office.
it’s important
take
and pantries
across
the country. But
in small
the pieces
Japanese.
wrote
about management
so
fully,to
weaggressively
were able to turn
the U.S. business
I’d ask and
customers
to try
risks. Playing
defense
weakens
you.
years since Kikkoman stepped intothem.
the Then clearly,
it was very
easythe
to understand.
around
in a few
years. But
that was probmeat.
was generally
posi- fascinating
J: Why didU.S.
youmarket,
decideMr.
to Mogi
attend
This is theably
case
with
likefor me. I knew
hasbusiwatched
as soyThe response
I found American
management
the
mostanything,
difficult time
so whatand
I realized
is business
sauce
transformed from tive,
curious
began tofrom
thinkdoing
aboutthis
studying
to win
stabilize
the situation,
s school in
the gradually
U.S.?
sports. YouI had
can’t
playing
defense.so we did a
outsider
culinary
thesoy sauce
in the
Then ain
bitthe
later,
I took aYou
course
lotgo
of research.
First, expanding
that
hadU.S.
a chance
U.S.
Mogi: I was
in mytosecond
orinsider.
third Call it
have to
on the offense.
So the sales was
condiment that
could. One
from a Prof. Whitehill from the business
key.
At
the
same
time,
we
had to stabilize
r at Keio University
[in Tokyo].
challenge for us from now is to deterschool
at the
University
of North Carolina,
prices,
especially
because inflation was
WSJ: What’s
the best
business
advice
eter Drucker’s books, called “The
mine the best
way
to do that.
Kikkoman today
is the
world’s topyou’ve gotten?
who was in Japan through a professorso high then. We put a lot of thought into
ctice of Management,”
was
transproducerHe
of wrote
soy sauce
and has expanded
exchange
program. What struck meWSJ:
was Where
pricing,
and
it took
a year or so to
Mr. Mogi: I took
a decision-making
d into Japanese.
about
would
you
like about
to take
into a diverse, multicontinent enterprise
how
practical
it
was.
A
Japanese
professor
adjust
them
to
an
adequate
level.
course from a professor named Joel
nagement so clearly, and it was very
Kikkoman from now?
with production bases in Japan, the U.S.,
would just lecture on who said what and
Dean. And the
advice he gave was that
y to understand.
I found American
Mr. Mogi: To
take
ourwas
soy-sauce
Europe and Asia. Kikkoman’s business
what was written where, and it was pretty
WSJ:
What
the mostbusiness
satisfying decia decision,
almost
imnagementalso
fascinating
and
began
toof foodwhen
model
in theever
U.S.made
to theasrest
of
includes a
wide
lineup
and making
dull.
So at that it’s
point,
I really
felt like
I hadwe built
sion you’ve
a manager?
possible to to
bego
100%
correct
the time. the world. We also want to use our soyk about studying
in the
U.S.wholesalebeverages,business
health-food
items,
to the
U.S. toall
study.
But even if it’s just 90% correct, you
n a bit later,
took a course
from
sauce business
model
in other
foodI operations,
as well
as apharmaceutical
Mr. Mogi:
I was
behindsegments,
the idea to build a
need people’s
fullWhat
support
in order
tobusiness
ex- such as thefactory
f. Whitehill
from
the business school
Del Monte
that
wethen, our overand
biotechnology-related
products.
WSJ:
did you
learn in
in thebrand
U.S. Up
until
ecute a decision.
us to useuseful? own in Asia,
he University of North Carolina, who
excluding
theweren’t
Philippines.
schoolHe
thatwanted
was particularly
seas
operations
profitable. But it
what we had learned in class to make
in JapanAlthough
through Japan
a professor-exstill accounts for about
was to
theembark
U.S. factory
thatbusiness
proved to be the
We’d also like
in new
70% of
its annual
is decisions
Mr. Mogi:
When we
were
in the
of
turning
point.
the best
possible
and
also
to process
nge program.
What
struckrevenue,
me wasthe company
opportunities,
such
as those related to
channeling
its global ambiour U.S.
what I learned
ensure thatbuilding
we explain
our factory,
decisions
w practicalaggressively
it was. A Japanese
profesfood in
and health. In Japan, the population
tions
to drive
growth.
Between
1974 and business
schoolto
definitely
WSJ:
How do
you maintain
clearly
convincingly
others. helped. Actually,
would just
lecture
on future
who said
what
is shrinking,
so we’re
trying
to focustradition
on
and
2006,
the
volume
of
soy
sauce
Kikif
I
hadn’t
gone
to
business
school
in
the
while
at
the
same
time
what was written where, and it was
producing higher-end products.move forward as a
koman
sold
outside
Japanfelt
grew anWSJ:
average
I think
it would’ve
been very difficult.
company?
What U.S.,
setbacks
have
you experitty dull. So
at that
point,
I really
of
9.1%
a
year
and
continues
to
climb
at
a
And
it
became
even
more
useful
after
I
enced as a manager?
I had to go to the U.S. to study.
WSJ: What sort of person makes a
strong pace.
took over the entire company. They say
Mr. Mogi: We have 300 years of history, so
Mr. Mogi: The one that stands out was
good manager?
that in two years of business school, you
in that sense, we have tradition. Yet it’s imshortly after
we the
opened
our U.S.
J: What did
youU.S.
learn
in first
business
Mr.job.
Mogi: Someone
with foresight,
the Playing
In the
-- its
and biggest overseas
learn
equivalent
of 10facyears on the
portant to aggressively
take risks.
tory.
Then
the
oil
shock
hit.
We
fell
aggressiveness
to
pursue
challenges,
ool that was
particularly
useful?
market -- Kikkoman holds a leading 58%
You learn about the internal operations of
defense weakens you. This is the case with
deephas
into the
red in 1973
and
in
and flexibility.
Mogi: When
in the process
sharewe
of were
the soy-sauce
business, which
a company,
as well
asalso
the decision-makanything, like sports. You can’t win playing
From curious potion to condiment that could
Kikkoman’s Mr. Mogi uses soy-sauce success in U.S. as a model for new forays
boomed over the past two decades thanks
to the growing popularity of Asian foods.
A key element of its marketing has been to
tout the superiority of its soy sauce. While
its main U.S. rivals use hydrolyzed vegetable protein instead of actual soy beans,
Kikkoman says, it relies on an organic
brewing process developed more than 300
years ago by Mr. Mogi’s ancestors in Noda,
near Tokyo.
Mr. Mogi, now 72 years old, has always
been a maverick of sorts. From his early
days with Kikkoman, he has pushed himself and the company to venture outside
tradition and onto new paths, including
the pivotal move in the early 1970s to build
its first overseas factory in the northern
U.S. state of Wisconsin.
28
ing process. So in my experience, business
school has certainly proven useful over
time.
defense. You have to go on the offense. So
the challenge for us from now is to determine the best way to do that.
www.mercedes-benz.com
WSJ: Where would you like to take Kik-
WSJ: What was your first job and what did
you learn from it?
koman from now?
Mr. Mogi: It was right after we first began
selling soy sauce in the U.S., and I worked
as a soy-sauce demonstrator during my
summers in New York. For example, at
supermarkets, I’d cook meat flavored with
soy sauce, cut it up into small pieces and
stick toothpicks in them. Then I’d ask customers to try the meat. The response was
generally positive, so what I realized from
doing this is that soy sauce had a chance
in the U.S.
Mr. Mogi: To take our soy-sauce business
model we built in the U.S. to the rest of the
world. We also want to use our soy-sauce
business model in other segments, such as
the Del Monte brand that we own in Asia,
excluding the Philippines. We’d also like
to embark in new business opportunities,
such as those related to food and health. In
Japan, the population is shrinking, so we’re
trying to focus on producing higher-end
products.
WSJ: What’s the best business advice
you’ve gotten?
WSJ: What sort of person makes a good
manager?
In manythe
ways, Kikkoman’s
fate in
U.S.
See
road in
athedifferent
light.
is tied to a decision a decade earlier by a
Mr. Mogi: I took a decision-making course
ent they automatically react to the surroundings. Introducing the Intelligent Light
Mr. Mogi: Someone with foresight, the
aggressiveness to pursue challenges, and
flexibility.
eader expanded gift-giving in Japan
The Interview: Managing in Asia
ceived gifts for their birthdays. This
That’s when I knew a gift business
time, all of them had, from parents and
could be successful.
friends. I realized that exchanging gifts
Our first gift business was to paint
on special occasions had finally taken
strawberries onto sandals. Sales took
off, and I realized that adding value
root in Japanese culture. And I believe
brings in more bucks. So we asked dethat the tie-up with Hallmark contrib15 October
signers to create characters that
we re-2007 uted to it.
produced on stationery items, cups and
other products.
WSJ: Whatmark
is the
toughest
problem
Mr. Tsuji: I was a civil servant in the
cards
in Japan.
you
face
as
a
manager?
Yamanashi government [a prefecture west
I was skeptical because a card is just a
WSJ:
What was
biggest
ob- up Mr.
Tsuji: Ipiece
haveofnever
jobs and
I
of Tokyo]
for 11the
years.
I wound
in the
paper.cut
I doubted
it would
make
stacle?
probably won’t.
this conviction
commerce department, where I promoted
a greatBut
business.
But Mr. Hall convinced
Mr.local
Tsuji:
The royalties
we about
would contradict
the company’s
comwasn’t widespread.
products.
When I talked
me, arguing
that unlike gift
products, 100
paidlaunching
to the designers
didn’t my boss
J: What was
first job
mitment [to
shareholders]
a listed
Oneyour
exception
was
my own business,
cards
could fit in aas
small
box and take up
in kindergartens
thought
I was
less inventory
space.
took
a chance, and
come
cheap.
Andcrazy,
if webecause
didn’t civil-servhow did you
start your
company, especially
when
we Iare
strugjobs
were well
respected,
we began packaging
gift products
ownicethe
rights
to their
de- with stable
pany? run by Christian
gling. Our consultants
have advised
me together
organizations.
wages.
But I was determined.
with cards.
signs,
competitors
might emu- to cut the payroll
Tsuji: I was
a civil servant
to raise operating
I foundedand
Sanrio’s
lateWhen
our business
masspredecessor,
pro- profit. But a company also has a ree Yamanashi government
where
a very
Yamanashi
Center
Co., in 1960,
the
The
always profitable.
duce
productsSilk
more
cheaply.
refecture That’s
west of
Tokyo]
sponsibility
to business
provide wasn’t
a harmonious
young
Shintaro
governor
and
vice
governor
of
the
prefecBut
in
the
early
‘80s,
I interviewed
elSo we applied for copyrights,
1 years. I wound up in the
environment and security for its
workTsuji,
now
79
years
ture
and
some
of
my
friends
invested
in
it.
ementary-school
students
again.
I
asked
and hired our own designers.
merce department, where
ers. I believe we can offset our losses
old, says he got the
I was thrilled, but because they invested
them if they had received gifts for their
Sanrio now has 30, who conomoted local products.
Shintaro Tsuji
idea that prompted
in me I realized I couldn’t mess up.by other means.
birthdays. This time, all of them had,
tinue to create characters.
n I talkedhim,
about
launching
decades
from parents and friends. I realized that
own business,
bossthe
Hello
Kitty
products
later, my
to found
WSJ: How did you come up with aWSJ:
gift Counterfeit
exchanging
gifts
on special
occasions had
you the best business
ght I waspredecessor
crazy, because
civil-serfrom Chinafinally
and elsewhere
be culture. And
company
to Sanrio WSJ:
Co., Who gave
business?
taken root must
in Japanese
advice?
jobs weretoday
wellone
respected,
with largest
sta- purveyors
costly to Sanrio.
What
company’s
of the world’s
I believe
that is
thethe
tie-up
with Hallmark
Mr. Tsuji:
Joyce
C. Hall,
theI was
founder
of giving
wages. But
was
determined.
policy
infringement?
ofIgift
products.
He remains president
of
Mr. Tsuji:
When
a child,
and on copyright
contributed
to it.
Hallmark
Inc. Back
in birthdays
the ’60s,and Christmas
When I founded
predecesMr. Tsuji: We are taking appropriate
Sanrio,Sanrio’s
which profits
from a multitude
of Cards
receiving
gifts on
products,
manufactured
by itselfthe
or under
common.
But I attended
WSJ: What
is thepiracy.
toughest
problem you
productswasn’t
of our
two companies
of- a ChrisYamanashi
Silk Center
Co., in 1960,
measures against
product
But
andgovernor
imprintedofwith
tian kindergarten,
kids exchanged
asin
a manager?
tencarwere placed
side by side where
in departgovernor license
and vice
theits cute
we want toface
do it
a harmonious way.
toonish
now numbering
about
onExchanging
their birthdays
as kidsChina
do in is still developing copyright legisment
storespresents
in Japan.
gifts
ecture and
somecharacters,
of my friends
inled by but
a round-faced
Western countries.
on Sundays
we that,Mr.
Tsuji: I have
never cut jobs and I
stillcat
wasn’t common
in Japan,Also,
so Halled in it. I 450
wasand
thrilled,
because white
lation
I believe,
will eventually
known
as
Hello
Kitty.
helped
bring
things
to
needy
people
in
probably
won’t.
But
mark’s greeting-card business wasn’t
invested in me I realized I
meet international standards.this conviction would
the community.
learned
that gifts bring
contradict the company’s commitment
successful. Mr.
Hall invitedI me
to his
dn’t mess up.
Thousands of different products bearing
smiles to people’s faces, and it made me
[to shareholders] as a listed company,
headquarters in Kansas City in 1969,
WSJ: Hello Kitty debuted in 1974, and
the Sanrio characters appear around the
happy.
especially when we are struggling. Our
and praised our gift-giving business.
J: How didworld,
you come
up with a gift
you can assume
its fans
are
agingme
as to cut the
especially in Japan and elsewhere
consultants
have
advised
Hefrom
said thatYears
attaching
a card
to a gift
ness?
well. Do you
plan to
toraise
target
older generin Asia and in the U.S. They range
later when
I visited
the kindergarten
payroll
operating
profit. But a
was
polite
to do,
Tsuji: When
I wasbedding,
a child,jewelry
givingand toys
ations?
clothing,
to a more my
son thing
attended,
theand
memory came
back.
company also has a responsibility to
asked
thethe
distributor
ofhad
Hallreceivingdigital
gifts on
birthdays
and
Mr. Tsuji: We
already
have items
lined
cameras,
robots,
credit cards
andme toIbe
asked
kids if they
ever received
provide
a harmonious
environment
and
mark cards in
Japan. present. Only a few had,upfrom
stmas wasn’t
common.
But I Kitty
at- characters
for older
fans. For
example,
have we can
stationery.
The Hello
a birthday
security
for its
workers.we
I believe
I was skeptical
because
a card
is just
ed a Christian
kindergarten,
items,
canes,by
reusable
also are
featured at thewhere
Sanrio Puroland
their parents.
That’s
when
I knew nursing-care
a gift
offset
our losses
other means.
piece of paper.
I doubted
would
exchanged
presents
on their
birthmultistory
indoor
theme
park in a
Tokyo.
business
could beitsuccessful.
shopping bags and so on. I am hoping
WSJ: Counterfeit
Hello
products
make a great business. But Mr. Hall con- that Hello Kitty
as kids do in Western countries.
will continue
to Kitty
appeal
Established
in 1973,
Sanrio posted
groupme, arguing
Our firstthat
gift business
was to paintto
strawand elsewhere must be costly
vinced
unlike gift
, on Sundays
we helped
bring
people infrom
all China
generations.
netpeople
profit ofin4.15
yen ($35.3
milberries
sandals.
took off, and I
to Sanrio. What is the company’s policy
products,
100
cardsonto
could
fit in Sales
a small
gs to needy
thebillion
commulion)
on
sales
of
96.671
billion
yen
for
the
realized
that
adding
value
brings
in
more
infringement?
I learned that gifts bring smiles to box and take up less inventory space. I
WSJ: Whatondocopyright
you do in
your free
fiscal
endedme
March
31. Salestook
and a chance,
bucks.
askedpackaging
designers to create
andSo
wewebegan
ple’s faces,
andyear
it made
happy.
time?
downthe
from
the previous
wecards.
reproduced on stationTsuji: We are taking appropriate
gift year,
productscharacters
togetherthat
with
ears laterprofits
when were
I visited
kinMr. Tsuji: IMr.
like
to write books [16 so
which Sanrio attributed to a decline in
ery items, cups and other products.
measures against product piracy. But we
The business wasn’t always profitfar, ranging from fairy tales to busiarten my son attended, the memdomestic retail and wholesale consumpwant to do it in a harmonious way. China
the early
I intercame back.
I asked
the
kids if says
theysalesable.
ness]. I also
to go to our
Puroland
tion.
But the
company
grew But in WSJ:
What’80s,
was the
biggest obstacle?
is like
still developing
copyright
legislation
viewed
elementary-school
students
amusement
park
and
interact
with cusever received
a
birthday
present.
elsewhere in Asia, and in Europe and
that, I believe, will eventually
meet interagain.
they
had re-we paid totomers.
a few had,
from
their
Brazil.
Mr.
Tsujiparents.
expects sales abroad
toI asked
Mr.them
Tsuji:ifThe
royalties
the
national standards.
y to become such a runaway hit
n she first appeared in 1974. Now
ays that without her the company
ldn’t have survived. At Sanrio’s
dquarters in Tokyo, Hello Kitty is evwhere—on a floor mat, a phone, a
player, and on the neckties of male
loyees. When Mr. Tsuji sat down
n interview
with
AyaiWar
Tomisawa,
Before
World
idn’t haveII,on
his
usual
birthday-party
o Kitty tie.
But
he did
gift
giving
among
r his HelloJapanese
Kitty watch.
children
How Sanrio leader expanded gift-giving in Japan
Path to Hello Kitty began in Tsuji’s kindergarten; learning from Hallmark Path to Hello Kitty began
in Tsuji’s kindergarten; learning from Hallmark
grow 20% a year for the next few years,
thanks especially to gains in Asia and the
Middle East, where Sanrio is exploring
with potential partners the possibility
of tie-ups in hotel and amusement-park
businesses.
Mr. Tsuji says he didn’t expect Hello
Kitty to become such a runaway hit when
she first appeared in 1974. Now he says
that without her the company wouldn’t
have survived. At Sanrio’s headquarters
in Tokyo, Hello Kitty is everywhere -- on
a floor mat, a phone, a DVD player, and
on the neckties of male employees. When
Mr. Tsuji sat down for an interview with
Ayai Tomisawa, he didn’t have on his
usual Hello Kitty tie. But he did wear his
Hello Kitty watch.
WSJ: What was your first job and how
did you start your company?
designers didn’t come cheap. And if we
didn’t own the rights to their designs,
WSJ: Hello Kitty debuted in 1974, and
competitors might emulate our business
you can assume its fans are aging as well.
and mass produce products more cheaply.
Do you plan to target older generations?
www.mercedes-benz.com
So we applied for copyrights, and hired
our own designers. Sanrio now has 30,
Mr. Tsuji: We already have items lined up
who continue to create characters.
for older fans. For example, we have nursing-care items, canes, reusable shopping
WSJ: Who gave you the best business
bags and so on. I am hoping that Hello
advice?
Kitty will continue to appeal to people in
all generations.
Mr. Tsuji: Joyce C. Hall, the founder of
Hallmark Cards Inc. Back in the ‘60s, the
WSJ: What do you do in your free time?
products of our two companies often were
placed side by side in department stores
Mr. Tsuji: I like to write books [16 so far,
in Japan. Exchanging gifts still wasn’t
ranging from fairy tales to business]. I
common in Japan, so Hallmark’s greetingalso like to go to our Puroland amusement
card business wasn’t successful. Mr. Hall
park and interact with customers.
invited me to his headquarters in Kansas
City in 1969, and praised our gift-giving
business. He said that attaching a card to
a gift was a more polite thing to do, and
asked me to be the distributor of Hall-
Be at one with your car.
ys of driving. Unless, of course, you are driving a Mercedes-Benz. The DIRECT CONTROL
Understand more about business
29
apanese
shareholders
Japanese shareholders
flex new voting muscle
CORPORATE N
In a landmark move, activist fund bests Nippon Steel, Mitsui
lex new voting
muscle
Japanese shareholders flex new voti
Corporate News
6 F R I DAY - SUNDAY, FEBRUARY 23 - 25, 2007
T H E WA L L ST R E E T J O
By Andrew Morse and Sebastian Moffett - 23 February 2007
TOKYO–When U.S.
Stock Exchange is full of
a head office that has desks for just six
pan
that they
how to run
companies ancompanies
that know
trade for
people. The company has a single foundry
their
company
and
other voices
nounce plans for a
less
the value
of their
72
kilometers
away.
“We can’t
Individual investors
agree,
saying
their
company
could
taxes,make
werethe
steadily reducin
Continued fromdon’t
firstthan
page
have
to
be
heard,”
says Mr.
merger, it isn’t unuassets,
such
as
cash
and
necessary
investment
in
equipment
tocreated
keep an over
big role in financing Callon,
big companies.
be
overwhelmed
soon
by
imports
stakes.
That
In Japan
a former
Morgan
Stanley
sual for shareholdrealindividuals
estate,
and could
beChina
us competitive,”
Mr. Niino
said. in the market, but di
Recently, though,
from
and
has
little
leverage
selling
managing
director.
40 million
ers to derail the deal
revived
by industry
con-Thursday’s
have been edging into
the market.
better bargain. “We are fect Tokyo Kohtetsu’s cor
shareholder
vote,tohestrike
says,ameans
over price or other
solidation.
Mr. Callon,
the Niino,
son of an ness.
International
The number of Japanese
individual
too
small,”
said
Yoshiyuki
It was making money,
that “truly, the individual shareissues. In Japan,
Business
Machines
Corp.
employee,
spent of cash.
shareholders
rose
to
38.1
million
in
the
company’s
head
of
finance,
sitdebt
and plenty
30
holders stood up.”
ndrew Morse
people
couldn’t
“There
remains
enough
inthree
years
as
a
toddler
in
Japan
and
later
2005
from
27.4
million
in
1996,
acting
in
a
head
office
that
has
desks
market
capitalization
of les
Sebastian Moffett
Long-silent shareholders are
remember that ever
efficiency
in
the
Japanese
mastered
the
language.
He
received
a
cording to official data,
and
they
for
just
six
people.
The
company
$100
million,
it was off the
gaining
power
in
Japan,
shaking
up
20
now make up 20% of
the market.
has a up
single foundry
72 in
kilometers
screens
of many institutio
happening
-- until
economy
that
doctorate
Japanese politics
at Stanford
OKYO—When
U.S. companies
managers
andcleaning
raising
hopes
that
Spurred
by
their
buying,
the
maraway.
“We
can’t
make
the
necesvestors.
Thursday.
just
some
of
it
will
provide
University
and
wrote
a
book
concluding
unce plans for a merger, it
the nation’s economic recovery
ket is booming. The could
benchmark
Ni-vigor.
sary
investment
a boost
to growth
forInstead
many
theequipment
traditional to
JapaneseBefore
systemMr.
of Callon’s fund
10
unusual for shareholders to depick
up
of that
be- in
kkei
225
Stock
Average
ended
keep
us
competitive,”
Mr.
Niino
officially
open
up shop an
An
investment
fund
years,”
says
Marc
Goldcross-shareholding
and
government-big
he deal over price or other ising owned mostly by banks and
Thursday at 18108.79,
itsfriendly
highestbusiness
said. partnersbusiness
a stake, Tokyo Kohtetsu
by ancouldn’t
Ameri- restein,
director
of Japan
ties was “comingupapart.”
In Japan, led
people
other
as
0
close in nearly seven
years.
Mr. Callon, inthe son of an Interna- move. It had been talking to
can,happening—unScott Callon,
research
atJapanese
Institutional
ber that ever
in
the past,
companies
The
trend
could
shake
up
Japational
Business
Machines
Corp. emSteel
Co.,office
a much bigger m
1985
’90
’95
’00
’05
rallied
shareholder
Shareholder
Services,
a
He
joined Morgan
Stanley’s
Tokyo
ursday.
creasingly must answer to individnese companies by forcing
them
to and
ployee,
spentin
three
a tod-at another
similarbank,
products
Source: Japan’s stock exchanges
support
big shareholders
proxy
adviser.
1997.years
Afteras
a stint
he 400 kilo
n investment
fundand
ledwon
by an
ual
independent
use
their
resources
more
effidler
in
Japan
and
later
mastered
away
in
western
a
vote
to
block
a
returned
to
Morgan
Stanley
in
2002
as
a Japan.
ican, Scott Callon, rallied
investment funds.
ciently. The Tokyo Stock
Exchange
the language.
He received
a doctorTheof equities
two companies,
holder support
and steel
won a
small Tokyo
In Just
the
past
fewJapan’s
months,
managing
director
in charge
11% of
$12.5 trillion
full trading
of companies
that
trade
for invesate
in stocks
Japanese
politics
at Stanwhich
customers nato block acompany
small Tokyo
steel would-be acquirer,isand
gi- in
personal
assets
are in
and
from being
some
aggressive
in Tokyo.
There,
Mr. Callon,
whohad
is tall,
less
than
the
value
of
their
assets,
ford
University
and
wrote
a
book
tionwide,
realized they
any fromtaken
beingover.
taken
ant Mitsui
& Japan
Co., whichtors
backed
investments,
Mr.over.
Callon bested
two of
havethe
madesimilar
companies
bow to their compared
thin and talks in rapid, high-energy bursts,
as cashbigand real
estate,
and
concluding
that
the traditional Jap- could save money by deCallon bested
of guns:
Japanthe nation’s
deal as the
smallsuch
company’s
31% of
$40.5fund
trillion
in the
U.S.
Inc.’stwo
biggest
top steeldemands.
Lastwith
October,
a U.S.
called
spent a week meeting all of the nearly 100
could be revived by industry
consolanese
system
of
livering products from
biggest guns:
theNippon
nation’sSteel
top Corp.,
gest which
shareholder.
Much of
the Japanese
money
sitspeople
in cross-shareholdmaker,
owns idation.
Steel Partners Japan
Strategic
Fund
underbusiness
him, a half-hour
at a time.
ing and played
government-big
the plant
closest to each
maker, Nippon
Steel
Corp.,
has
historically
been
a ofbanks,
whichoftraditionally
a
a majority
of the
would-be“There
acquirer,
and
bought
23.1%
the
shares
a
small
in“There
remains
enough
ineffities
was
“coming
apart.”
client.
h owns atrading
majority
of
the
view
among
the
business
elite
in
JaPleaseFood
turn Co.,
to He
page
6 Morgan
giant Mitsui & Co., which backed ciencystant-noodle
maker, economy
Myojo
then
In 2005,Stanley’s
Mr. Callon’s
went the two
in the Japanese
joined
To-grandmother
Last October,
the deal as the small company’s biggest that cleaning
made a tender
wholekyo
comcoma.aWhile
of the family
up justoffer
somefor
ofthe
it will
office in into
1997.a After
stint the
at rest
announced
they would
shareholder.
pany.
wanted
remain bank,gathered
in San
heThe
stayed
provide
a Myojo
boost managers
to growth
for to another
he returned
to Jose,
Mor-California,
combine.
deal gave
they
eventually agreed
Tokyo
work on business
projects
manyindependent
years,” says but
Marc
Goldstein,
gan Stanley inin2002
asto
a managing
Tokyo
Kohtetsu share“There has historically been a view amongdirector
to sell
out toresearch
Nissin Food
Products
Co., a in charge
that would
determine
team’s bonuses.
of Japan
at Instidirector
of equities
in To- hisholders
0.228 share of Osthe business elite in Japan that they knowtutional
much
larger noodleServices,
maker. That
During
that
period,
his grandmother
died.each of
Shareholder
a allowed
kyo. There, Mr.
Callon,
who
is tall,
aka Steel for
how to run their company and other
Steeladviser.
Partners to sell its stake at athin
profit.
“I wasn’t
making
the right
choices
as a Kohtetsu
big proxy
and talks
in rapid,
high-entheir
Tokyo
voices don’t have to be heard,” says Mr.
is now
a similar
strategy
with
human
being,”meeting
Mr. Callonshares.
says he That
told his
In Itthe
pastapplying
few months,
some
ergy
bursts, spent
a week
translated
Callon, a former Morgan Stanley manag- aggressive
Sapporo
Holdingshave
Ltd., amade
beer maker.
bosses.
quit,under
and last to
year
an
investors
all of the nearly
100 He
people
a started
6% premium
at the
bow
demands.
a half-hour
time.
The companies
said th
director.move
Thursday’s
shareholder
vote,companies
investment
fund with Sanae
Shimizu,
a
he Bank ofingJapan’s
to course
of overseas
economies,
in-to their
government
said him,
Wednesday.
Oil at a time.
Last
October,
a
U.S.
fund
In
2005,
Mr.
Callon’s
was
fair,
citing
opinions
ob
he
says,
means
that
“truly,
the
individual
The
trend
of
former
colleague.
interest rates for the first cluding that of the United States, prices are off their peaks. Global
calledincreasing
Steel Partners
Ja- markets are buoyant. grandmother went into a from major Japanese sec
shareholdersthe
stood
sharesince July underscores
sur-up.”are abating.”
stock
Strategic
coma.
restIchigo,
of houses.
activismFund
TheWhile
fund isthe
called
part of a Japangly upbeat state of the
Indeed, thoughpan
the holder
U.S.
econ“It’s a pretty benign picture,”
bought
23.1%
of said
the Nariman Behravesh, the
family
gathered
in “once-in-a-lifetime
Mr. Callon didn’t think s
arehas
gaining
has also
affected
nese
saying
that means
d’s major Long-silent
economies,shareholders
which omy
slowed substantially
from
chief
of a it
small
Jose, California,
in Japan,
an acquiring co
power
indespite
Japan, shaking
uptorrid
managers
Korea.
chance.”
It has just he
$25 million
in assets
nue to perk
along
the its
pace and
of ashares
yearSouth
ago,
has instanteconomist at U.S. forecaster San
Global
noodle
maker,
Myojo
stayed
in
Tokyo
to
work
usually
has
to
raising
hopes
that
the
nation’s
economic
Steel
Partners
under
management
-a
tiny
amount
bypay
the a 10% to 15
ge done by high energy prices kept growing fast enough to keep Insight. “You’ve got at least moderFood and
Co.,
then
a
business
projects
that world
mium
for itsofprey.
recovery
could pick up vigor.
Instead of down
U.S.
invesstandards
of the fund
-- most
it In the U.S
agging housing
markets.
unemployment
despite
a made
ate growth
and inflation thaton
looks
offerIcahn
for the
would
determine
premium
is typical. Mr.
owned
mostly
banks and
otherIntender
torcountries
Carl
from family,
friendshis
and former
clients.
he world’s being
central
bankers
are by housing
slump.
the 13
whole
company.
team’s bonuses. During thought the premium sho
friendly
business
partners
in the
bought
nfident that
growth
will rethatasuse
thepast,
euro,
growth
is about
ex- Myojo
managers
grandhigher
pected to abate
last10%
year’s
Japanese companies increasingly
must from
ofwanted
asixSouthto re- Pushing ahead thatAsperiod,
early ashis
April
of last year,
Mr.than
Cal- usual because
main
independent
but
mother
died.
“I
wasn’t
kyo
Kohtetsu’s
low valuati
year high and
but remain Korean
well above
answer
to individual shareholders
tobaccoFalling commodity prices aren’t lon
Yuka Hayashi
in Tokyo,
de- and Ms. Shimizu identified Tokyo
eventually
agreed
making the right choices the clear cost savings. Besid
the
sluggish pacethey
of prior
years.
llen Perryindependent
in Frankfurt investment
terring industry expansion ........Kohtetsu
.19
funds.
company
and got
as a potential investment. The
to sell out to
Nissin Food
as a human being,” Mr. reduction in delivery cos
Data released Wednesday
show
Greg Ip in Washington
a director
on
company’s
shares
at lesscompany
than
Products
Co.,as
a the
much
Callon
says he
told were
his valued
combined
would
Spain
joined
and
Italy
Just 11% of Japan’s $12.5
trillion
in Germany
board
through
a
six times
its annual
net profit.
Though
it
Scott
Callon
larger
noodle
maker.
bosses.
He
quit,
and
last
more
clout
in
the market fo
steady andinflationunder
constandouts
in
the
fourth
quarter.
for
the
moment
like
it’s
not
out
of
personal assets are in stocks and similar That proxy
battle
that
trades
on an
smaller
com-cars or demo
allowed
Steel
Partstarted
anexchange
invest- forsteel
from
hat their main
worry is less
the
Globally,
inflation is received
still low wide
by atcontrol.”
The biggest risk heyear
sees:
investments,
compared
with
31% of $40.5
panies,
that
is less than
half
the average
ners
to
sell
its
stake
at
a
profit.
It
is
ment
fund
with
Sanae
Shimizu,
a
buildings,
and could squeez
diate future
thanwhether
conthough too much of a good thing—namely,
trillion
in the U.S.
Muchrecent
of thehistorical
Japanesestandards,
tention.
price-to-earnings ratio for
steel from
companies
now
applying
a
similar
strategy
former
colleague.
prices
suppliers.
ns are breeding
excessive
spec- which
higher
than some central bankers a global economy so robust that
money
sits in banks,
traditionally
onitcalled
the Tokyo
Stock
Exchange.
with Sapporo
Holdings
Ltd.,
a andThe
fund is
Ichigo,
part
Challenging the deal wo
on in financial
markets.
would
prefer.
U.S.
consumer
prices,
pushes
up
prices
prompts
the
played a big role in financing big compa- beer maker.
Mr. Callon says the small steel company,
of
a Japanese
saying that means tough. Mr. Goldstein of I
ednesday’snies.
move by Japan’s excluding food and energy,
rose Kohtetsu
U.S. andCo.,
European
central
banksOne
to
called
Tokyo
is a classic
reason
was It
that
of the Shareholder
compaThe
trend
of
increasing
share“once-in-a-lifetime
chance.”
hasheirstional
Servic
al bank reflected that confi- 2.7% over the past 12 months, the
turn
to page
2million
case
of executives
notPlease
heeding
shareholder
ny’s founder
andunder
the Ministry
of Finance,
holder
activism
has
also
affected
just
$25
in
assets
Goldman
Sachs strategist
e in its own economy as well as
Recently, though, individuals have been Southinterests.
Management
of the
which
hadamount
received by
sharesMatsui
as payment
for don’t know
Korea. Steel
Partners
andcompany,
management—a
tiny
say they
roader world economy. Lifting
edging
into
the
market.
The
number
of
which
collects
scrap
steel
and
processes
taxes,
were
steadily
reducing
their
stakes.
U.S.
investor
Carl
Icahn
bought
the
standards
of
the
fund
world—
cases
in
Japanese
corpora
to a still very low 0.5%, the
of ain South
Koreanwanted
to- most
family,
friends
and tory
whereinshareholders
blo
Japanese
individual
for use
construction,
to sellof it from
That
created
an overload
of selling
the
al bank said
it “judged
that shareholders rose to aboutit10%
bacco
company
and
got
a
director
former
clients.
merger
agreed
on
by
the
c
38.1
million
in
2005
from
27.4
million
in
out
to
a
larger
rival
in
Osaka
for
only
a
6%
market,
but
didn’t
affect
Tokyo
Kohtetsu’s
conomy is likely to continue
board through
a proxy
As early as
April
of last
nies.money, had
1996,of
according
to official data, and they on thepremium.
Mr. Callon
says bata much larger
core
business.
It year,
was making
irtuous circle
production,
received
attention.
Mr. Callon and
Shimizu
identiWithathe
two parties to t
now make up
of the market. Spurred tle that
premium
waswide
in order
given the potential
noMs.
debt
and plenty
of cash. With
market
me and spending,”
and20%
that
Mr.cost
Callon
says
thethe
small
steel fied Tokyo Kohtetsu
as a potential
to discuss
how th
their the
buying,
the market is booming.
savings
from
deal.
capitalization
of less thandeclining
$100 million,
it
ertainties byover
future
shares
atinstituthe price, Mr.
The benchmark Nikkei 225 Stock Averagecompany, called Tokyo Kohtetsu investment. The
wascompany’s
off the radar
screens rived
of many
a classic
case of
executives
were
valued at
less investors.
than six times thought he saw the hand of
ended Thursday at 18108.79, its highest Co., isTokyo
Kohtetsu
executives
disagree,
saytional
not heeding
shareholder
interests.
its annual net profit. Though it Inc. Tokyo Kohtetsu’s b
close in nearly seven years.
ing their
company could
be overwhelmed
eard in Asia
Management
of the
company,
trades
on an exchange
smaller
shareholder,
with a 29.1% s
soon by imports
from
China and has
little
Before Mr.for
Callon’s
fund could
officially
whichleverage
collectsto
scrap
steel
and prothat
than
Mitsui,
the
big trading com
The trend could shake up Japanese
strike
a better
bargain.companies,
“We
openisupless
shop
andhalf
snap up
a stake,
Tokyo
forsmall,”
use insaid
construction,
the the
average price-to-earnings
ra- ItTokyo
Kohtetsu’s
companies by forcing them to use their cessesareit too
Yoshiyuki Niino,
Kohtetsu made a move.
had been
talking president
wanted
to
sell
out
to
a
larger
rival
tio
for
steel
companies
on
the
Toously
worked
at Mitsui fo
st a lull inresources
a bull run?
more efficiently. The Tokyo
company’s head of finance, sitting in
in Osaka for only a 6% premium. kyo Stock Exchange.
than 30 years. Meanwhile
30
hy the time may be right
Mr. Callon says a much larger preOne reason was that heirs of Nippon Steel owns 61% of
mium was in order given the poten- the company’s founder and the Steel.
get in now > Page 19
tial cost savings from the deal.
Ministry of Finance, which had reMitsui and Nippon Ste
a landmark move,
ivist fund bests
ppon Steel, Mitsui
lobal economy ignores strains
, housing markets fail to stem growth; central banks focus on risks
dia’s bank opening
inance, sit- debt and plenty of cash. With a tal sales of $32 billion went to Mit- nior Tokyo Kohtetsu executive
t has desks market capitalization of less than sui or a joint venture between Nip- watched over them as they
e company $100 million, it was off the radar pon Steel and Mitsui.
scanned the documents with a porkilometers screens of many institutional in“It’s safe to say [Tokyo table optical character reader and
the necesvestors.
and Osaka
Steel]
weren’treports
his company
received
periodic
on downTokyo
commented on the
wrote
some Kohtestu
entries byfirst
hand.
to Osaka
Steel Co., a much bigger maker Kohtetsu
uipment to
Before
Mr. 400
Callon’s
fund could
independently,”
saysbuyer
Mr. and seller
On Friday,
Ichigoannouncement.
anthe takeover
talks but the
dealFeb.
after2,Ichigo’s
Shunof similar
products
kilometers
away in acting
Mr. Niino
officially
up companies,
shop and snap
likeplayers.”
other observ- nounced thesuke
proxy
contest, the
saying
were thewho
“main
Hirashima,
company’s president,
western
Japan.open
The two
which Goldstein,
up a stake,nationwide,
Tokyo Kohtetsu
made
a ers believes the big backers on it would seek
votes
tothe
reject
the was at risk. “In
argued
that
company
had customers
realized
they
an InternaIt had been
talking to
Osaka eachMany
side of
influenced
the deal.smaller sharedeal at the shareholder
meeting.
It makers of general
Tokyo Kohtetsu’s
the near future,
domestic
couldmove.
save money
by delivering
products
es Corp. emCo., closest
a muchtobigger
maker of
Mr.
Niino
of Tokyo
Kohtetsu
mailed proxy
holders
thought
they were
getting too
steelballots
are goingtoto Tokyo
see imports from abroad,
fromSteel
the plant
each client.
rs as a tod- similar products 400 kilometers said,
“TheSome
merger
and the
merger
Kohtetsu’s particularly
1,600 shareholders,
little.
protested
the
deal on Yahoo
China,” wrote Mr. Hirashima
r mastered
in western
ratio
have
nothing
to do
94% of whom
invesJapan
Corp.’s
bulletin
boards.
onare
theindividual
company Web
site.
Last away
October,
the two Japan.
ed a doctorThe
two
companies,
with
the
relationship
betors.
The
following
Monday,
he
“The
exchange
ratio
is
atrocious,”
announced they would comcs at Stan- which had customers natween
and
Nip-himself
found 30 proxies
mailgripedMitsui
one who
called
By thatfilling
point, his
Izumi
Takaishi had already
bine. The deal gave Tokyo
rote a book tionwide, realized they
pon
Steel.” A Mitsui box. Soon, 100
proxies
werewith
arrivNigenoken.
decided
to
vote
Mr. Callon. The
Kohtetsu shareholders 0.228
itional Jap- could save money by despokesman,
Minoru ing each day.
51-year-old president of a real-estate comshare
of
Osaka
Steel
for
each
-sharehold- livering products from
Kasahara, declined to disTokyo Kohtestu first comAs soon as Keniti Nagano heard
pany had built up a stock portfolio valued
of their
ig business
theTokyo
plant Kohtetsu
closest to each
cuss why Mitsui was will- mented on the deal after Ichigo’s
the
merger
news,
the
43-yearat some $400,000 over 25 years, including
shares.
That
translated
to
t.”
client.
ing to accept the small announcement. Shunsuke Hirashold trade-association
employee
5,000 shares
in Tokyo
Kohtetsu valued at
a 6% premium
at the time.
tanley’s ToLast October,
the two
premium
for its shares.
ima, the company’s
president,
arbecame
so
angry
that
he
asked
about
$25,000.
The
companies
said
the
r a stint at announced they would
A Nippon Steel spokes- gued that the company was at risk.
his boss
for a day
off to attend
pricecombine.
was fair, citing
opin-gave
ned to MorThe deal
man,
Masato
Suzuki,
“In the near future, domestic makthe
Tokyo
Kohtetsu
When
Kohtetsu
ions
obtained
from
major
a managing Tokyo Kohtetsu sharesaid his company shareholders’
re- ers of general
steelTokyo
are going
to seeannounced the
meeting
where the
deal would
be from
merger
terms,
Mr. Takaishi was surprised
Japanese
securities
houses.
uities in Toholders
0.228 share
of Osceived
periodic
reports
imports
abroad,
particularly
on. “I wanted
to askChina,”
the
by the
merger ratio.
who is tall, aka Steel for each of
onvoted
the takeover
talks but
wrote
Mr.low
Hirashima
on Never having been
president
explain
this deal
involved
in a protest against management,
Mr. Callon
so.
d, high-entheir didn’t
Tokyothink
Kohtetsu
the
buyer toand
seller
theto
company
Web site.
Keniti Nagano
me,”
said
Mr. Nagano,
thought
there
was nothing he could do
Evenshares.
in Japan,
an acquirek meeting
That
translated
were
the
“main
players.”who owns
By that he
point,
Izumi
Takaishi
90,000
about 0.5%
it. “Itothought
it would be very diffiing company
hasattothe
ople under
to a 6% usually
premium
Many shares,
of or
Tokyo
hadofalreadyabout
decided
vote with
company.
change something
me.
companies
smaller
shareholders Mr. Callon. cult
The to
51-year-old
presi- that the company
pay atime.
10% The
to 15%
premiumsaid the price Kohtetsu’s the
Mr. Callon’s
was
fair,
opinions
obtainedis thought they were getting too lit- dent of a real-estate
had decided,”
says Mr.
company
hadTakaishi.
for its
prey.
In citing
the U.S.,
a 30% premium
went intotypical.
a from
Some
protested
theout
deal
built up a stock portfolio valued at
Callon
printed
50on
orYaso postings
Mr.major
CallonJapanese
thought thesecurities
premium tle. Mr.
the rest of
houses.
hoofrom
Japan
bulletin
boards.
some
25 years,
in-arrived and, two
theCorp.’s
Internet
bulletin
board and
took$400,000
Thenover
the Ichigo
proxy
should
be higher than usual because of
athered in
Mr. Callonlow
didn’t
think so.
“The
exchange
ratio
atrocious,”
5,000
in Tokyo
them
with him
to aisbusiness
trip in cluding
Sindays shares
later, a form
from Tokyo Kohtetsu
Tokyo Kohtetsu’s
valuation
andEven
the
lifornia, he
Japan,
an Besides
acquiring
one On
whothe
called
himself
Kohtetsu valued
at says
about
$25,000.
gapore.
plane,
alreadyNiexhausted
that he
“didn’t
explain the merger
clearin
cost
savings.
the company
reduction griped
kyo to work
usually
has to
pay
a 10% to company
15% pre- genoken.
When Tokyo
anfrom long work hours, he started reading
enough.”Kohtetsu
He returned
the Ichigo proxy.
in delivery
costs,
the
combined
rojects that
mium
for
its
prey.
In
the
U.S.,
a
30%
As
soon
as
Keniti
Nagano
heard
nounced
the
merger
terms,
Mr.
Tathe
postings
and
was
overcome
with
emowould have more clout in the market for
rmine his
typical.
Mr. Callon
merger
news,
the 43-year-old
surprised
the made
low a final appeal to
“It was
a toxic
combination ofkaishi
being was Last
Friday,by
Ichigo
scrappremium
steel fromiscars
or demolished
build- the tion.
ses. During
thought
the
premium
should
be
trade-association
employee
bemerger
ratio.
Never
having
been
inso
tired
and
so
frustrated
and
so
angry
the
managements
of
Tokyo
Kohtetsu and
ings, and could squeeze lower prices from
his grand- higher than usual because of To- came
soI angry
he asked
his
volved
against
managethat
startedthat
crying,”
he says.
He got
up in a protest
Osaka Steel,
sending
the presidents of both
suppliers.
. “I wasn’t kyo Kohtetsu’s low valuation and bossand
forwent
a daytooff
tobathroom
attend the
ment,
there
was noththe
forToa while
untilhe thought
companies
letters
asking for meetings.
ght choices the clear cost savings. Besides the kyo Kohtetsu shareholders’ meet- ing he could do about it. “I thought
he had composed himself. “I realized we
Mr. Hirashima called Mr. Callon to say he
Challenging
the
deal
would
be
tough.
Mr.
being,” Mr. reduction in delivery costs, the ing where the deal would be voted it would be very difficult to change
had to fight.”
appreciated the overture, but wasn’t going
Goldstein
of Institutional
he told his
combined
company Shareholder
would have on. “I wanted to ask the president something that the company had
to change the terms of the deal, says Mr.
Services
and
Goldman
Sachs
strategist
uit, and last more clout in the market for scrap
Mr. Callon decided Ichigo should buy
Callon.
Kathy
Matsui
say cars
they don’t
know of any
an investsteel
from
or demolished
shares
in
Tokyo
Kohtetsu
and
try
to
alter
cases
in
Japanese
corporate
history
where
Shimizu, a buildings, and could squeeze lower
the deal. If he gathered a significant
On Thursday, 42% of Tokyo Kohtetsu
shareholders
blocked
a merger agreed on
prices from
suppliers.
block
of
shareholders
against
the
merger
shareholders agreed with Mr. Callon,
by
the
companies.
chigo, part
Challenging the deal would be
terms, he figured management would
blocking the deal after the three-week
that means tough. Mr. Goldstein of Instituagree to bargain for a better deal. “The
campaign. Some Tokyo Kohtetsu shareWithtional
the twoShareholder
parties to theServices
deal declinnce.” It has
and
strategy was to get them to talk,” he says.
holders who had pledged their shares to
ing toGoldman
discuss how
theystrategist
arrived at the
sets under
Sachs
Kathy
“I wanted it to be like this is a difference
Mr. Callon’s proxy solicitation traveled to
price,Matsui
Mr. Callon
thought
heknow
saw the
hand
amount by
say they
don’t
of any
among friends.”
the meeting to show support. Mr. Nagano,
of Japan
Inc.
Kohtetsu’s
biggest
nd world—
cases
in Tokyo
Japanese
corporate
histhe trade-association employee, sat next
friends and
tory where
blocked
a
shareholder,
withshareholders
a 29.1% stake,
is Mitsui,
merger
agreed
on by
the Kohtetcompa- to explain
deal to
said Mr.
Ichigo this
amassed
anme,”
11% stake
in Tokyo
Ko- says
to Mr.
throughout the proceedings,
decided,”
Mr.Callon
Takaishi.
the big
trading
company.
Tokyo
f last year,
nies.
owns
90,000
shares,
Then theMr.
Ichigo
proxy
htetsuwho
in two
months,
but
in mid-January
Callon
said.arrived
su’s president
previously worked at Mitsui Nagano,
mizu identiparties
to the giant
deal or about
0.5%
of the
company.
two days later, a form from Tomeetings
with
Tokyo
Kohtetsu and and,
Osaka
for moreWith
thanthe
30 two
years.
Meanwhile,
a potential
declining
to discuss
how they
arMr.
Callon
printed
50 orgot
sonowhere.
kyo Kohtetsu
he saysposted
“didn’ton its Web site
Steel
executives
Mr.out
Callon
In that
a statement
Nippon
Steel owns
61% of Osaka
Steel.
ny’s shares rived at the price, Mr. Callon postings
from
the
Internet
bulletinopinions
explain the merger
enough.”
He reHe says
they
cited
the fairness
Thursday,
Tokyo Kohtetsu
called the vote
n six times
thought
he saw
the are
hand
of Japan board
tookthe
them
with
him to a turned the “truly
Ichigoregrettable”
proxy.
andand
called
price
non-negotiable.
and added, “We believe
Mitsui
and Nippon
Steel
longtime
Though it
Inc. partners,
Tokyo and
Kohtetsu’s
biggest
Last Friday,
Ichigo opportunity
made a finalhas been lost.” The
a precious
business
in financial
terms business trip in Singapore. On the
for smaller
a 29.1%
stake, isto plane,
already
exhausted
managements
of ToA week
later, Ms.
Shimizu,from
Ichigo’sappeal
lawyer to the
company
said at this
point it isn’t planning
that shareholder,
relationship iswith
far more
significant
s than half
Mitsui,
the
big
trading
company.
long
work
hours,
he
started
readkyo
Kohtetsu
and
Osaka
Steel,
and
three
assistants
went
to
Tokyo
Koto
renegotiate
a
deal
with Osaka Steel at a
Mitsui than its holding in little Tokyo Koarnings ra- Tokyo Kohtetsu’s president previ- ing the
postings
and was overcome
presidents
htetsu’s
headquarters
to ask for thesending
share- the
better
price. of both
htetsu. In the year ended March 31, 2006,
on the To- ously worked at Mitsui for more withholder
emotion.
“It was
a toxic
com- wouldn’t
companies letters asking for meetregistry.
Tokyo
Kohtetsu
31% of Nippon Steel’s total sales of $32
than 30 years. Meanwhile, giant bination of being so tired and so ings. Mr. Hirashima called Mr. Calgive them a copy, but did allow them to
billion went to Mitsui or a joint venture
at heirs of Nippon Steel owns 61% of Osaka frustrated and so angry that I lon to say he appreciated the overuse a conference room for two hours to
between
Nippon
Steel
and
Mitsui.
er and the Steel.
started crying,” he says. He got up ture, but wasn’t going to change
copy it. A senior Tokyo Kohtetsu execuhich had reMitsui and Nippon Steel are and went to the bathroom for a the terms of the deal, says Mr. Caltiveuntil
watched
over
them as they
“It’s longtime
safe to saybusiness
[Tokyo Kohtetsu
yment for
partners,and
and in while
he had
composed
him-scanned
lon.
the
documents
with
a
portable
Osaka Steel] weren’t acting independself. “I realized we had to fight.” opticalOn Thursday, 42% of Tokyo
character
reader
and wrote
down some
ently,” says Mr. Goldstein, who like other
Mr.
Callon
decided
Ichigo
Kohtetsu shareholders agreed
entries
by
hand.
observers believes the big backers on each should
buy shares in Tokyo with Mr. Callon, blocking the deal
side influenced the deal.
Kohtetsu and try to alter the deal. after the three-week campaign.
Ongathered
Friday, Feb.
2, Ichigo announced
the Tokyo Kohtetsu shareholdIf he
a significant
block Some
contest, saying
it would
seekers
votes
Mr. Niino
Tokyo
Kohtetsu
said, “The
5% of their
said ofSK
Corp.
spokeswoman
of proxy
shareholders
against
the
who had pledged their shares
to reject
thehe
deal
at themanageshareholderto Mr. Callon’s proxy solicitation
merger
and the Kho.
merger
ratio havefurther
nothing merger
1.6 trillion
Katharine
“Therefore,
terms,
figured
meeting.
It mailed
proxy ballots
Tokyo to the meeting to show
to doadministrative
with the relationship
between
Mitsui ment
eriod,” said
actions
including
would agree
to bargain
for a to traveled
Kohtetsu’s
1,600
shareholders,
of
mission offian appeal
will
be carefully
re- better
deal. “The
strategy
was to94%support.
Mr. Nagano, the trade-asand Nippon
Steel.”
A Mitsui
spokesman,
viewed,
so the
commission’s
themare
toindividual
talk,” heinvestors.
says. “IThesociation
follow- employee, sat next to Mr.
Minoru
Kasahara,
declined
to discussan- get whom
eriod, internouncement
today
not be wanted
it to be like
this is30
a differCallon
ing Monday,
he found
proxies filling
his throughout the proceedwhy Mitsui
was willing
to should
accept the
y the equivthe
judgment
on encemailbox.
among Soon,
friends.”
ings, Mr. Callon said.
100 proxies were arriving
smallconsidered
premium for
itsfinal
shares.
A Nippon
but the four
issue.” Masato Suzuki, said
Ichigo
amassed an 11% stake in
In a statement posted on its
each day.
Steelthis
spokesman,
rices of the
A GS Caltex official said “we will Tokyo Kohtetsu in two months, but Web site Thursday, Tokyo
by 40 won appeal the FTC ruling because we in mid-January meetings with To- Kohtetsu called the vote “truly rewere not involved in the collusion kyo Kohtetsu and Osaka Steel exec- grettable” and added,
“We believe
Understand
more about business
d it has also in 2004.”
utives Mr. Callon got nowhere. He a precious opportunity has been
prosecutors
SK Corp., the country’s largest says they cited the fairness opin- lost.” The company said at this
ners for price-fixing
Never having been involved in a protest
against management, one investor thought
there was nothing he could do about Tokyo
Kohetsu’s low merger ratio.
7
In
To
are
to c
By A
THE W
Daxin
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mun
and
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tient
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own
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and
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tent
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fort
see
onyBalancing
CEOtwo
tightens
grip
cultures, Sony CEO tightens grip
Corporate News
In America, you can.”
the company, who the hell is?”
ward Stringer
In a series of interviews at the
Fixing this iconic Japanese comHoward
Stringer
early
caution
in
bid
tooffix
end ofscraps
a tumultuous
year for
Sony. pany
is one
the giant
biggest chalps early
caution
Mr.
Stringer
says
he
balanced
lenges
in
business.
Mr.
Stringer’s diBy Yukari Iwatani Kane and Phred Dvorak - 5 March 2007
those competing demands to lemma is that he is caught between
id to fix
giant
squeeze 4% growth out could
of Sony’s
different
styles and
TOKYO–
fall further
behindmanagement
nimbler and more
reasons that I don’t want to spend the rest
electronics
cultures.
He sayshas
he recognizes
the
Howard Stringer
aggressive rivals.
Mr. Stringer
already
of my life discussing.”
business
falling behind
kari Iwatani
Kane
is annoyed.
shiftedand
gears risk
once,ofadopting
a more amid
asser-breakhred Dvorak
beat earnings neck changes in electronics. But he
Since becomtive stance after his softly-softly approach
Mr. Stringer started life as a TV reporter.
estimates for says there is an equal risk in moving
Sony
Corp.’s
faltered.
He spent nearly three decades at CBS
KYO—Howard Stringer is anfour succes- ing too aggressively.
first
foreign
Inc. -- he became a U.S. citizen in 1985
Since becoming Sony
sive quarters.
“I don’t want to change Sony’s
chief
executive
When
he became
CEO,
-- eventually rising to become head of
first foreign
chief
executive
Sony’s
stock
culture
to Mr.
the Stringer
point where it’s unalmost
two
years
started
cautiously.
He
knew
that
despite
broadcasting. He made his name at Sony
two years ago, he has been
price
has recognizable from the founder’s viago, he
has been
its global
name,
leading a turnaround of its U.S. entertained by Japanese
financial
anarisen
44%brand
sion,”
he Sony
says. remained
“That’s the balancslammed
by
a
traditional
Japanese
company,
full
of
ment operations, including streamlining
nd Sony employees for being
since he took ing act I’m doing.”
Japanese
finantenure
its movie and music businesses, slashing
nected from
the company’s
overemployees
in June with lifetime
Whether
he canwho
pullwere
it off is still
analystsduring
and
suspicious
change.
had opened
hundreds of jobs.
perations,cial
especially
2005.
He bris- of an
open Japan
question.
For the WelshSony employees
the ideaborn
of having
foreign
managers
g crises. Investors
in the U.S.,
tles up
attocritiexecutive,
the
task is complibeing
disconrunmostly
Japanesecated
companies,
notably
Carlos a sea of
When he was named CEO, Sony was in a
while, haveforput
him
under
cism,
by having
to navigate
nected
at Nissan
Motor Co.,
it hadn’t
poor state, a company built on hardware
nt pressure
to from
fix Sony’s
Howard Stringer fromGhosn
Japaobstacles,
frombut
uncommunicative
the company’s
necessarily
the Western style
of Mr.
engineering that was floundering in the
ms more quickly.
And he was
nese,
that he embraced
top executives—one
surprised
g conflicting
from lives in a hotel when in Tokyo
and Stringer with bad news at a board
daily advice
operations,
management.
age of software. For decades, Sony had
des.
spends too much time in New York meeting—to poor public-relations
especially during
produced the gold standard of consumer
ok, in America,
I was
toldInvestors
to andinLondon
tomeanrun the company
ef- advice.
Sony
two big
crises.
the U.S.,
Mr. Stringer,
65 yearsThe
old,risk
stucktowith
thefrom his
gadgets such as televisions and tape playts,” Mr. Stringer
“In Jafectively.
management-through-persuasion
while, says.
have put
him under
constant presexecutive team
he inherited. He tried
ers. Sony made products the old way, first
was told not
to cut
costs.
Twoproblems
Says
Mr.quickly.
Stringer, sitting
a is that
the company
could fall fursure
to fix
Sony’s
more
gentlyinpersuading
managers
to cooperate
developing hardware, then, almost as an
nt worlds.And
In he
thiswas
country,
conference
room in Sony’s
ther and
behind
nimbler
more aghearing conflicting
advice
withTokyo
one another
urged
them toand
think
afterthought, adding software to make
n’t lay people
verysides.
easily. headquarters: “If I’m notabout
Pleaseinturn
to way.
page 14 it run. The Walkman, the epitome of the
running
fromoff
both
developing products
a new
company’s success, was a triumph of elec“Look, in America, I was told to cut
The dangers of that approach quickly betronics engineering; ever since, Sony’s incosts,” Mr. Stringer says. “In Japan, I was
came clear. Two big missteps -- a delayed
novations have focused largely on hardware
told not to cut costs. Two different worlds.
launch of the PlayStation 3 videogame
design -- making products smaller, thinner
In this country, you can’t lay people off
console and an embarrassing battery reand lighter.
very easily. In America, you can.”
call -- tarnished Mr. Stringer’s first years
in charge. In both cases, managers tried
As Apple Inc. has shown, most spectacuIn a series of interviews at the end of a tuhandling problems in the traditional Sony
larly with its iPod music player, nifty softmultuous
year
for
Sony.
Mr.
Stringer
says
way:
quietly
and
without
informing
top
ware is the ticket to creating hit gadgets
on a global buying spree,
done in Asia than the
te Linebaugh
he balanced those competing
to
executives.
these days. In 2005, it wasn’t only the iPod
gobblingdemands
up pharmaceuyear before.
squeeze
4%
growth
out
of
Sony’s
electronthat was vexing Sony. Competitors such
Mr. Calello’s rise is all
NG KONG—When Paul tical companies in Euics business
and
beat rope.
earnings
estimates
an
as Microsoft Corp. -- a software company
Tata
Steel beat outLast fall, Mr. Stringer put
thetogether
more notable
for the
moved here
five years
ago
for
four
successive
quarters.
Sony’s
stock
executive
team
more
to
his
liking.
The
-- were eating into Sony’s gadget business,
a
Brazilian
rival
to
obstacles
the
bank
Credit Suisse Group’s Asian
price has risen op44% since
he took
over steel-shuffle included movingfaced.
an uncommunicaespecially its famed PlayStation.
snatch
British
At the time he arthe investment-banking
in June
2005.
He bristles
at criticism,
Kutaragi,
One of Mr. Stringer’s goals was to encourmaker
Corus PLC fortive star executive, Ken rived
in from
Asia,hisCredit
n he took over
was
peanuts.
from
Japanese,$12.1
that he
lives in
videogame
age Sony’s hardware engineers to treat
billion.
Ina Austra-position running Sony’sSuisse
had unit.
been barred
ain actionmostly
was in
faraway
hotel when in Tokyo and
too merger
much ac-Mr. Stringer now receives
reportfrom stock
software seriously when developing prodlia, spends
corporate
forevery
two years
ork.
is to
booming.
trading -in“more
India in the
time in New
Yorkofand tivity
London
run the
about manufacturing problems
ucts. But Sony’s culture celebrates proud
e old U.S.-centric
view
Investment bankersemails than I care to read,”
wake
a scandal involvorld was that
beingeffectively.
sent to
company
heofsays.
innovators who do what they want. Many
ing allegations of price
as a bit like being sent to Si- make money from this by
still quote an admonition by one Sony
helping
companies issueIn one of the interviews,manipulation.
the 46-year-old
Says Mr.Bostonian
Stringer, sitting
in a conference
Mr. Stringer
veteran: If you have the misfortune to be
or raise “If
capital incounseled patience to his critics,
On topnoting
of that, the
room in Sony’s Tokyo stock
headquarters:
under a clueless boss, don’t tell him about
Paul
Calello of Sony’s
other ways—carving
bank had
run afoul of
t’s no longer
case: Last
I’m the
not running
the company,
who the hell offthat his
turnaround
U.S. operanew ideas -- just execute them.
China in 2001
, Mr. Calello
is?”was promoted billions of dollars of feestions took five years to complete.
“You after arcorporanging
meetings
for Taiwan’s
fihief executive officer of the in the process. Advising on
can’t
go through
a Japanese
company
with
For example, last summer, more than 100
rate mergers
is is
also lucrative:
Last nance
ministry and European
ny’s global
Fixinginvestment
this iconic Japanese
company
a sledgehammer,”
he said.
Sony colleagues attended a mock funeral
year alone,
60% more deals were
underscoring
Asia’s
grow-challenges
Please turn to page 2
one of
the biggest
in business.
thrown by famed engineer Toshitada Doi.
ancial muscle
world-wide.
Mr. Stringer’s
dilemma is that he is caught
In another interview, conducted just after
He had resigned after his pet project, the
er years of
chasing
vaguemanagement styles and
between
different
the battery-recall crisis, Mr. Stringer’s
Aibo robotic dog, was axed, one of many
ses of Asian boom times to
cultures. He says he recognizes the risk of
forbearance was wearing thin. “I’m going
activities Sony deemed superfluous. At the
investment banks are rakfalling behind amid breakneck changes in
to do what I want to do now,” the chief
ceremony, the 42-year Sony veteran recalls
the money. Last year, the
electronics.
But
he
says
there
is
an
equal
executive
said.
“I’m
not
going
to
be
folsaying that the Aibo was a symbol of a
s biggest-ever initial public
risk
in
moving
too
aggressively.
lowing
everybody’s
suggestions.
I’ve
got
to
risk-taking spirit that was now dead.
g of stock was for a Chinese
be true to myself in some ways.
ndian companies are going
“I don’t want to change Sony’s culture to
Mr. Stringer didn’t know much about
the point where it’s unrecognizable from
Mr. Stringer says nothing has changed in
electronics, Sony’s core identity, when he
the
founder’s
vision,”
he
says.
“That’s
the
his
management
style.
The
perception
of
took over. His careful approach, a hallJournal Report
balancing act I’m doing.”
him as a hands-off manager, he says, was
mark of his time in the U.S. as well, was
Whether he can pull it off is still an open
fueled by his decision to live in a Tokyo
evident from his first days, notably when
question. For the Welsh-born executive,
hotel. The CEO says he now regrets that
he decided to keep -- and defer to -- the
artnership
thewith
task MIT
is complicated by having to navidecision but also rejects as “insane” the
Japanese executive team chosen for him by
gate a sea
of obstacles, from uncommuninotion that he wasn’t firmly in control.
his predecessor, Nobuyuki Idei. The execun Management
Review,
cative top executives -- one surprised Mr.
He says his response to the crises wasn’t
tives were electronics veterans familiar
ecial section
> Page R1
Stringer with bad news at a board meeting
a change of heart but a quickening of his
with Sony’s operations in Japan.
-- to poor public-relations advice. The
long-term plans. He adds that his record
At the centre of
Asia’s
markets.
risk to Sony from his managementhas been
obscured
by the battery crisis,
But soon after, Mr. Stringer was upset he
through-persuasion is that
the
company
“which
took
too
long
for
bizarre
Japanese
couldn’t unveil cuts in the company’s prodAt the leading edge.
sia’s investment banker invasion
outs, IPOs jump and so do paychecks; no longer ‘Siberia’
www.db.com
siness Insight
32
Corbis
Old and new together: Howard Stringer and Nobuyuki Idei, whom he succeeded as Sony’s chief executive officer in June 2005, in Tokyo.
Continued from first page
nished Mr. Stringer’s first years in charge. In self in some ways.
gineering that was floundering in the age of
gressive
Mr. Stringer
already both
cases, managers
triedsay
handling
probMr. with
Stringer
says nothing has Mr.
changed
in software.
For decades, within
Sony hadthe
produced
Kutaragi
was notorious
system,
people
familiar
Connect.
uct linerivals.
because
his tophas
executives
hadn’t
shifted gears once, adopting a more asser- lems in the traditional Sony way: quietly and his management style. The perception of him the gold standard of consumer gadgets such
company
for
his
reluctance
to
commuMr.
Stringer
declined
to
intervene,
asking
finalized
their
plans.
tive stance after his softly-softly approach without informing top executives.
as a hands-off manager, he says, was fueled as televisions and tape players. Sony made
faltered.
Last fall, Mr. Stringer
ex-thebyproblems
his decisionon
to live
in a Tokyonicate
hotel. The
the oldor
way,
first developing
withproducts
his bosses
other
units. Inhardthe twoputtotogether
work an
out
their
When he became CEO, Mr. Stringer ecutive team more to his liking. The shuffle CEO says he now regrets that decision but ware, then, almost as an afterthought, add2005,
Mr.
Kutaragi
hosted
an
event
at a
own,
the
people
say.
The
executives
“were
all
put
in
place,”
says
started cautiously. He knew that despite its included moving an uncommunicative star also rejects as “insane” the notion that he ing software to make it run. The Walkman,
global
brand name,
Sony remained
a tradi- executive,
re- the epitome
of the company’s
bighis
electronics
conference
in Lassuccess,
Vegaswas
to a
Mr. Stringer.
“What
was I supposed
to do? Ken Kutaragi, from his position wasn’t firmly in control. He says
tional Japanese company, full of employees running Sony’s videogame unit. Mr. Stringer sponse to the crises wasn’t a change of heart triumph of electronics engineering; ever
celebrate the U.S. launch of the PlayStaThe new software packaged with the WalkShow up on Monday and say, ‘I don’t like
with lifetime tenure who were suspicious of now receives every report about manufactur- but a quickening of his long-term plans. He since, Sony’s innovations have focused
tion Portable
hand-held
game
machineprodman,emails
a compromise
so errorwho you’ve
given
me?’”
change.
Japan had
opened
up to the idea of ing problems—“more
than I care tosolution,
adds thatwas
his record
has been obscured
by largely
on hardware
design—making
having foreign managers run Japanese com- read,” he says. prone that U.S. executives
the battery
crisis,to
“which
longone
for biuctscompany’s
smaller, thinner
and lighter.
of the
biggest
products
refused
sell took
it. too -panies, notably Carlos Ghosn at Nissan MoIn one of the interviews, Mr. Stringer zarre Japanese reasons that I don’t want to
As Apple Inc. has shown, most spectacuthat year. He
executives
from
Sony
therest
software
Sony
Chubachi
emerged
tor
Co.,President
but it hadn’t Ryoji
necessarily
embraced
counseled patience
to hiseventually
critics, notingabandoned
that spend the
of my lifein
discussing.”
larlydidn’t
with itsinvite
iPod music
player, nifty
softthe
Western
style of management.
his turnaround Japan,
of Sony’stoo.
U.S. By
operations
Stringer Tsujino
started life as a TV
reporter.
ware is thedivision,
ticket to creating
gadgets
Sony’s
electronics
which hit
provided
mid-2006,Mr.
Messrs.
as Mr.
Stringer’s
right-hand man. Mr.
Mr. Stringer, 65 years old, stuck with the took five years to complete. “You can’t go He spent nearly three decades at CBS these days. In 2005, it wasn’t only the iPod
the parts. that was vexing Sony. Competitors such as
andcompany
Wiserwith
hada sledgeboth quit
Sony,
andathe
Chubachi,
was promoted
at thethrough
same a Japanese
executive
team59,
he inherited.
He tried gently
Inc.—he
became
U.S. citizen in 1985—evenpersuading
managers
to cooperate
one spent
hammer,” he said.
rising to become head of broadcasting. Microsoft Corp.—a software company—
Connect unit had beentually
disbanded.
time as Mr.
Stringer
after with
having
another and urged them to think about develIn another interview, conducted just after He made his name at Sony leading a turn- were eating into Sony’s gadget business, esIn developing
theitsPlayStation
3 console,
his career
overseeing
as
oping
products
in a new way.components such
the battery-recall
crisis, Mr. Stringer’s for- around of its U.S. entertainment operations,
pecially
famed PlayStation.
The dangersHis
of that
approachexperience
quickly be- bearance
thin. “I’m going
to do including
its movie the
and music
One of Mr.
Stringer’s goals
to encourdevice’s latest
iteration,
Mr. was
Kutaragi
Mr. Stringer
concedes
backingstreamlining
off. But he
videotape.
primary
in soft-was wearing
came clear. Two big missteps—a delayed what I want to do now,” the chief executive businesses, slashing hundreds of jobs.
age Sony’s hardware engineers to treat softwent
over
budget
on
development
costs
says
Connect
was
a
vestige
of
the
old
Sony
ware
was
the
programs
Sony
embedded
in
launch of the PlayStation 3 videogame con- said. “I’m not going to be following everyWhen he was named CEO, Sony was in a ware seriously when developing products.
without
Mr. Stringer,
way
ofgotdoing
business,
where
executives
hardware
devices, not
the
kind of modern
sole
and an embarrassing
battery
recall—tarbody’s suggestions.
I’ve
to be true
to my- poor
state,
a company built on hardware
en- informing
But Sony’s culture
celebrates accordproud innova-
ing to a person familiar with the situation.
When Mr. Stringer urged Mr. Kutaragi to
have dinner with the heads of the electron“To be honest, it didn’t click with me at
Nissan when
Motors --Howard
Carlos Ghosn
Shinsei
Vodafone Japan -- Darryl Green
Mitsubishi
-- Rolfonce
Eckrodta year,
ics division,
he didMotors
so just
first
first talked about
theBank -- Masamoto Yashiro
Considered the most
Western
Perseveres and pushes
Shinsei
a profit in 2001
2004
this personResigned
said. inA2004
spokeswoman for Mr.
After
theto Connect
unit Quit
wasin disbanded,
importance
ofsuccessful
software,”
Mr. Chubachi
manager in Japan
U.S. private-equitythe
fund Ripplewood
bought failedincluding
Vodafone Japan
replaced Green, hiredKutaragi
in 2001,
Controlling shareholder
DaimlerChrysler dispatched
declined
to comment.
entire business,
hardware,
says in an interview.
In 1999, France's Renault bought a controlling
lender Long-Term Credit Bank of Japan in 2000.
after sales declines and complaints that the unit
German Rolf Eckrodt to turn around the struggling
software
and Yashiro
services, was
to Sony’s
stake in the troubled Japanese car maker, and put
Former Citibank Japan
head Masamoto
wasn'tmoved
paying attention
to local customs. It hired
Japanese auto maker. Eckrodt became CEO in 2002.
Ghosn in
charge. He slashed
suppliers
like a Western lender.
He under
a British
manager,
then aof
Japanese executive,
After
a restructuring
failed
to stem losses,coMr. Stringer
tried
to winplan
Mr.
Kutaragi’s
audio-devices
group
the
control
One
casualty
of Mr.headcount,
Stringer’s
earlyvowed to run the bank
and debt, pledging to return Nissan to profit in
was castigated in Japan's parliament after pulling
then another American, before selling the unit to
DaimlerChrysler sold in 2005.
operation with
patience. “I’ve had dinner
Yutaka Nakagawa, an executive
who was
hands-off
style
setto troubled borrowers.
2001. He beat his
target.was Connect, a unitloans
Japan's Softbank in 2006.
with [Mr. Kutaragi] more times than I’ve
openly skeptical of the Connect music
up before his arrival that he nonetheless
had dinner with my wife, and that’s not
service, according to Sony managers. He
championed as an example of collaborareally healthy,” Mr. Stringer says.
told colleagues that Sony should concention among hardware, software and servtrate on its strengths in hardware.
ices. Connect’s task was to create a portIn September, Mr. Kutaragi announced
Mr. Nakagawa declines to comment, other
able music player and online music service
Sony was halving shipments of the new
than to say that Connect “didn’t seem
under the Walkman and Connect brands
PlayStation to the U.S. and Japan and
quite right.”
to challenge Apple’s iPod and iTunes.
was pushing back its European launch. At
a news conference, Mr. Kutaragi blamed
Another stumbling block was Mr. Kutaragi,
Connect had two presidents -- Sony hardSony’s electronics group for failing to
the renegade head of Sony’s videogames
ware veteran Koichiro Tsujino in Tokyo
produce enough of a critical component,
division who invented the PlayStation
and Philip Wiser, an online-music pioneer,
exposing his tense relationship with the
videogame consoles, the company’s most
in New York. The two clashed. Mr. Tsujino
successful marriage of cutting-edge
wanted to build a new type of software
electronics technology and software. Mr.
from the ground up, while Mr. Wiser
Stringer hoped Mr. Kutaragi would come
wanted a more conventional approach. As
up with similar hit ideas for Sony’s other
the feuding intensified, they complained
products.
to Mr. Stringer about the dual-president
outlook Mr. Stringer was after.
Culture barrier
ran independent fiefs. “We learned from
the lesson that we are not developing software that way anymore,” Mr. Stringer says.
Understand more about business
33
Corporate News
division.
“If we’re asked whether Sony’s quality of
manufacturing has declined, I would have
to say ‘yes,’” Mr. Kutaragi told reporters.
At a board meeting a few weeks later, Mr.
Kutaragi sprang another surprise on Mr.
Stringer, suggesting he drop the price
of the entry-level PlayStation 3 console
by 20% to just under 50,000 yen (about
$425) to make it more competitive.
“It wasn’t financially one of my best moments,” Mr. Stringer says. “The budget
implications were self-evident. [But] I
agreed because I wanted the launch to be
successful.”
The price cut will help double videogame-related losses for Sony’s year ending
March 31 to about $2 billion, erasing
many of the efforts made by other units
to boost profitability. “I think it’s fair to
say that any time you’re aiming for the
stars, you’re running the risk of falling a
bit short on your timetable,” Mr. Stringer
says.
Meanwhile, another crisis was bubbling
over. In August, Dell Inc. announced it
was recalling 4.1 million laptop-computer batteries made by Sony after the PC
company decided they posed a danger of
overheating and catching fire. Dell’s recall
triggered a stampede by other computer
makers and prompted Sony to launch a
voluntary global recall program in late
September.
Mr. Stringer says he first heard about
the magnitude of the problem not from
his own managers but from Dell founder
Michael Dell.
The problem: In Sony’s typical independent fashion, the battery subsidiary, Sony
Energy Devices Corp., tried solving the
issue itself, says Mr. Stringer. Instead of
treating the matter as a public-relations
challenge, the battery executives saw it as
one of engineering.
Mr. Stringer says he erred by deferring
to his Japanese deputies’ suggestion that
he avoid public comments about the battery recall. The idea was to contain the
problem in the components division, but
Mr. Stringer’s silence gave the impression among Japanese press and employees that he wasn’t taking responsibility
for one of Sony’s worst public-relations
disasters. The constant stream of reports
about battery fires was “a kind of Chinese
water torture,” Mr. Stringer recalls, and
prevented the company from putting a lid
on the matter.
Within Sony, Mr. Stringer’s silence disappointed some employees, several executives say. Some questioned Mr. Stringer’s
commitment to the electronics business
because of his living arrangements in
Tokyo, a complaint echoed among local
financial analysts.
“Mr. Stringer has no background and he’s
not in Japan managing the day-to-day,
so it’s impossible” to run the company
effectively, says Tatsuya Mizuno, an electronics analyst for Fitch Ratings. “Sony’s
DNA is in electronics...so the top management needs to understand what’s going on
there.”
Mr. Stringer bristles at the idea that he
isn’t committed to Tokyo. “I have a home
in England and I have a home in New
York -- I’m already bloody cross-cultural
-- and I just didn’t want to be in a lonely
apartment somewhere in Tokyo even for
symbolic reasons.”
At the same time, Mr. Stringer says he
should have “faked it better -- I mean
that seriously.” He says Mr. Idei warned
him about what might happen it he didn’t
establish a home here. “I should’ve put
the flag up the flagpole and said here’s
my residence in downtown Tokyo -- I’m
here! -- even if it’s less practical than living
where I live, and much less comfortable
and friendly.” He still lives in a hotel.
The two crises were a wake-up call. In videogames, Mr. Stringer says he persuaded
Mr. Kutaragi to give up day-to-day control
of the division in December; he remains
chairman and chief executive, focused
on next-generation games. Mr. Stringer
replaced him with the U.S. head of the
videogame unit, a longtime ally.
In electronics, Mr. Stringer moved Mr.
Nakagawa, the executive who questioned
the role of software, to a unit overseeing
batteries, chips and other components.
Messrs. Stringer and Chubachi receive
daily emails alerting them about manufacturing problems companywide via a
product-safety officer who was appointed
in the fall.
Mr. Stringer also put all of Sony’s consumer gadgets under Katsumi Ihara. Mr. Ihara
played a key role in jump-starting the
mobile-phone joint venture between Sony
and Telefon AB L.M. Ericsson of Sweden,
which has built a reputation for style.
Mr. Ihara has set up a task force, based
in the U.S., to develop products that will
allow users to download content from the
Internet onto Sony products like the Walkman and PlayStation. He also created a
center in Tokyo to develop software.
One early effort: a module for TVs that allows users to watch video from the Internet
using a remote control. It uses some of
the same software as the PlayStation 3
console.
Mr. Stringer says the rough experience of
the past few months gave him an opening
to speed up his plans. “All crises create
opportunities,” he says. “While we were
being beaten up on the one hand, it was an
opportunity to accelerate the transformation.”
Citigroup launches bid for all of Nikko Cordial
A $10.8 billion deal could boost Tokyo as financial hub
By Andrew Morse - 7 March 2007
TOKYO–The next big Japanese investment bank could be America’s Citigroup
Inc.
The world’s biggest bank by market capitalization said yesterday it will launch a
$10.8 billion tender offer for all the shares
of Nikko Cordial Corp., Japan’s third-biggest brokerage firm. The transaction, if
completed, will be the largest acquisition
of a Japanese company by a foreign firm
and the most significant example of how
Japan’s once-protected financial industry
is opening up.
34
The tender could also be a sign of progress
for Tokyo as the city strives to establish
itself as a global financial hub. Japanese
authorities would like Tokyo to play the
same role in Asia that New York and
London do in their respective regions.
The Tokyo Stock Exchange, for example,
has sought to establish links with other
stock markets around the world -- it will
develop products with the New York and
London stock exchanges under recently
concluded pacts, as well as actively recruit
listings from companies in other countries. Financial Services Minister Yuji
Yamamoto said in January he was considering measures such as tax incentives and
preferential treatment to attract foreign
financial firms to Tokyo.
Nikko Cordial is reeling from an accounting scandal that has eroded its business
and faces possible delisting of its shares.
But a deal would give Citigroup access to
Nikko Cordial’s huge client list, a retail
network of 109 branches and, importantly,
bolster their joint-venture investmentbanking business, which has a big underwriting and merger-advisory business.
Such a deal would transform Citigroup’s
business in Japan, and help it move toward
Chief Executive Charles Prince’s goal of
increasing the revenue Citigroup draws
from foreign markets to 60% from 44%
now. Japan has the world’s second-biggest
stock market after the U.S., as well as the
Corporate News
world’s biggest government-bond market.
Citigroup sees Japan as particularly promising because the needs of both consumer
and corporate clients are changing here.
As more Japanese look to the stock market for better returns than they can get on
their bank accounts, Citigroup is betting it
will find a big client base for its wealthmanagement products and services, as
well as its credit-card and retail-banking
services.
“It is a clear signal, a step in the direction
for more competitive capital markets in
Japan,” Citigroup Japan Chief Executive
Douglas Peterson said in an interview.
Despite its size, Tokyo has lagged other
major financial centers in its openness
to global business. Three big securities
houses -- Nomura Holdings Inc., Daiwa
Securities Group Inc. and Nikko Cordial
-- dominate the underwriting and retail
business, and the markets here have been
stagnant for years. That has crimped
growth of the finance sector, which accounts for just 6.5% of the Japanese
economy, as opposed to 8.1% in the U.S.
and 8.3% in the U.K. Tokyo has also
fallen from favor with companies seeking
public listings; just 1% of the companies
listed on the Tokyo Stock Exchange are
foreign, compared with 14.2% in New York
and 19.6% in London. Both Japanese and
foreign financial houses grouse that local
regulators don’t spell out rules and regulations with enough clarity. Unlike the U.S.,
Japan doesn’t have dedicated commercial
courts, where judges are knowledgeable in
financial issues.
Japan’s first push to expose its financial
industry to competitive forces came in
1998, when it began implementing changes
based on the 1986 “Big Bang” deregulation in the U.K. Fixed stock-trading
commissions were phased out, removing
some of brokerage firms’ profit cushING | PAGE 19
ion. Brokerage firms were allowed to sell
sophisticated financial products, such
as bonds built from mortgages. Other
changes allowed for complex trading strategies that allowed brokerages to bundle
PAGE 19 trades for multiple customers, giving them
an opportunity to trim costs.
e reaps rewards
by Indonesia
ts are fired up
sources’ coal
from five years earlier. In the October-December quarter of 2006, Citigroup took a
charge of $415 million after closing 80% of
its Japanese consumer-finance branches
because of new regulations on consumerfinance loans.
Its reputation in Japan also suffered
from a series of run-ins with regulators. In 2004, Japanese regulators pulled
Citigroup’s private-banking license after
finding the company had misled customers about investment risks, had tied loans
to specific investments and had allowed
transactions that might have been linked
to money laundering.
Regulators complained that Citigroup’s
complex organizational structure made
it difficult to know who was responsible
for the bank’s operations. It also lost
customer data and had computer-system
problems that merited public rebukes
from regulators. Fallout from the bad
publicity hurt Citigroup’s business in the
potentially lucrative wealth-management
business.
Since then, Citigroup has taken steps to
remedy these problems. In January, the
bank said it would become a holding company so that a layer of senior management
would be responsible for all of Citigroup’s
activities, giving regulators a team of people they can contact if a problem arises.
Citigroup wanted to cut a deal with Nikko
Cordial while the Japanese company still
has its stock listing. That is because it
wanted to avoid seeming like an aggressive
foreign firm taking advantage of a Japanese company in trouble to buy it on the
cheap, according to people familiar with
the situation. It also considered Nikko
Cordial to be a good fit and wanted to act
before a potential rival could emerge. “It is
one of those rare opportunities that crops
up,” Mr. Peterson said. “The retail market
is expected to grow as savers transform
into investors.”
In trying to become a major player in Japanese retail broking, Citigroup is wandering
into territory where others have failed. In
1998, Merrill Lynch & Co. bought much of
Yamaichi Securities Co., a failed Japanese
brokerage firm, hoping it could recreate
the success it has with individual investors
in the U.S. But the New York-based investment bank shuttered the operation in 2001
after it posted big annual losses.
Citigroup is hoping to avoid the difficulties that tripped up Merrill. First, Merrill
mistimed its purchase, waiting until the
brokerage firm had gone bankrupt and
lost most of its customers. Citigroup is
trying to do a deal as quickly as possible
-- announcing the tender offer before the
Tokyo Stock Exchange makes a decision on
whether to delist Nikko Cordial’s shares.
In addition, Japanese attitudes toward the
stock market have changed. When Merrill
made its move, Japan’s stock market was
still sinking, scaring away individual investors who had already lost money after the
country’s stock bubble burst in the early
1990s. But the market has almost doubled
over the past three years, and investors are
!
becoming more enthusiastic -- especially
as Japanese
bonds
and
bank
deposits
W E D N E S D AY, M A R C H 7, 2 0earn
07
next to nothing. The number of individual
shareholders rose to 38.1 million in 2005,
from 27.4 million in 1996, according to official data.
Citigroup launches bid
for all of Nikko Cordial
The offer for Nikko Cordial will cover all
its shares and give shareholders 1,350 yen
A $10.8 billion deal
could boost Tokyo
as financial hub
These deregulations gave foreign investment banks, long used to these types of
products, an opportunity to expand in
Japan, where they wrested business away
from local brokerage firms. Last year,
By Andrew
Morse
Goldman Sachs Group
Inc.,
UBS AG and
World-Wide
7
Nikko Citigroup Ltd., the joint venture,
arthquake
jolted
TOKYO—The next big Japanese
were
the Indonethree biggest mergers-and-acquikilling at least
peoplebased oninvestment
sition70
advisers
the value of bank
their could be Ameriinjuring hundreds.
The
Citigroup
Inc.
deals, according
to dataca’s
tracker
Thomson
magnitude quake struck the
The
world’s
Financial. Nomura Holdings,
Japan’s
big-biggest bank by
coast of Sumatra and was
gest brokerage firm, wasmarket
fourth. capitalization said yesteras far away as Malaysia and
day it will launch a $10.8 billion tenapore, where some buildder offer for all the shares of Nikko
Citigroup,
however,
has hit problems in
were evacuated.
Page
2
Cordial Corp., Japan’s third-bigJapan. Its $391 million net
profit
in the firm. The transacgest
brokerage
wo suicidecountry
bombings
hit
last year represented
a
64%
drop will be the largtion, if completed,
e pilgrims streaming toest
acquisition
of a Japanese comd the Iraqi holy city of Karpany
by
a
foreign
firm and the
killing at least 93 people.
most significant example of how
senior U.S. diplomat urged
Japan’s once-protected financial
h Korea to fully comply
industry is opening up.
a deal to abandon its nuThe tender could also be a sign
programs, as Pyongyang
of progress for Tokyo as the city
n talks on normalizing restrives to establish itself as a glo-
News—
($11.66) for each share they own. While
that represents only a 0.75% premium to
the stock’s closing price of 1,340 yen yesterday, that is after the potential premium
has been eroded by a dramatic rise in
Nikko Cordial’s stock price -- 14% yesterday alone -- amid growing speculation that
Citigroup would make a move. Citigroup
said it would announce the starting date of
the tender offer in coming days.
Pension plans modeled on U.S. 401(k)
plans have been introduced to Japan,
giving individuals a safer way to invest
in stocks. Other individuals are investing
through unit trusts, investments similar to
U.S. mutual funds.
Buying into Japan
Foreign banks and brokerage firms acquiring Japanese targets this decade
DATE ANNOUNCED
TARGET
ACQUIRER
Sept. 2006
Fukushima Bank
Merrill Lynch Intl Bank*
June 2006
Panta Rhei Securities
Jaleco*
Feb. 2006
Nishi-Nippon City Bank
Merrill Lynch Intl Bank†
April 2003
Aozora Bank
Cerberus NCB Acquisition LP*
Jan. 2001
Tokyo Sowa Bank
Lone Star Funds*
May 2000
Kofuku Bank
Investor Group*
Jan. 2000
Monex
Investor Group*
*Completed †Pending
Source: Thomson Financial
thorities would like Tokyo to play stock exchanges under recently
the same role in Asia that New concluded pacts, as well as acYork and London do in their re- tively recruit listings from compaspective regions. The Tokyo Stock nies in other countries. Financial
Exchange, for example, has Services Minister Yuji Yamamoto
sought to establish links with said in January he was considermore
other stock markets around the Understand
ing measures
suchabout
as taxbusiness
incenworld—it will develop products tives and preferential treatment
35
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Corporate News
Sanyo president to resign over
differences
LEADING THE NEWS
T H E WA L L ST R E E T J O U R N A L .
T H U RS DAY,
Goldman-led owners want unfocused firm to shed units faster
Sanyo president to resign over differe
By Yukari Iwatani Kane - 29 March 2007
Goldman-led owners
want unfocused firm
to shed units faster
TOKYO–To understand the problems
facing Japan’s electronics industry, look no
further than Sanyo Electric Co.
The midsize electronics company is crackBy Yukari Iwatani Kane
ing from the strain of trying to stay in
too many businesses.
It hasunderstand
a sprawling
TOKYO—To
the problems facing
Japan’s
electronics
portfolio of products
ranging
from
chips industry, look no further than Sanyo
to batteries to home
appliances. It also
Electric Co.
builds homes, owns
anmidsize
Internet-service
The
electronics comis cracking
the strain of
provider, offers pany
financial
and from
recruiting
trying
to stayain
too many busiservices and even
operates
retirement
nesses. It has a sprawling portfolio
home and a golfofcourse.
reluctance
productsThe
ranging
from chips to
batteries
to home
appliances.
It also
to shed weak and
noncore
businesses
has
builds
homes,
owns
an
Internet-serresulted in diluted profit.
vice provider, offers financial and recruiting services and even operates
Last year, Sanyoa retirement
received home
a $2.6
andbillion
a golf course.
The reluctanceled
to shed
and nonbailout from a consortium
by weak
Goldman
core businesses has resulted in diSachs Group Inc.
Since
it
began
restrucluted profit.
turing in 2004, Sanyo
has Sanyo
cut more
than
Last year,
received
a $2.6
billion bailout
from
a consortium
15% of its work force,
closed
factories
andled
by businesses.
Goldman Sachs
Group
Since
shed some minor
Yet
theInc.
comit began restructuring in 2004,
pany continues Sanyo
to be has
unprofitable
as
it
has
cut more than 15% of its
work revenue
force, closed
factories
been unable to stem
declines
in and
shed
some
minor
businesses.
Yet the
products such as digital cameras,
mobile
company continues to be unprofitphones, televisions
and
home
appliances.
able as
it has
been unable
to stem revIt is expected toenue
report
itsinthird
straight
declines
products
such as digmobile
phones,
televiyear of losses inital
thecameras,
current
business
year
sions and home appliances. It is exending Saturday.
pected to report its third straight
year of losses in the current business
year44-year-old
ending Saturday.
Yesterday, Sanyo’s
president,
Yesterday,
Sanyo’s
Toshimasa Iue, said
he would
step 44-year-old
down
president, Toshimasa Iue, said he
after less than two
years
of disawould
stepbecause
down after
less than
years because
of disagreegreements with two
Goldman
Sachs and
the
ments
with
Goldman
Sachs
and the
other financial firms, who have majority
other financial firms, who have macontrol over thejority
company
and
have
control
over
the been
company
pushing for faster
departure
andchanges.
have beenThe
pushing
for faster
The departure
of Mr. Iue,
of Mr. Iue, who changes.
is a grandson
of Sanyo’s
who is a grandson of Sanyo’s
founder, ends the
family’s
leadership
of
founder, ends the family’s leaderthe company and
opens
doorand
to opens
a salethe
ship
of the the
company
of some units. door to a sale of some units.
“I was unable to gain the trust of
the financial firms and investors
“I was unable tothat
gain
trust
of therecovery,”
arethe
crucial
to Sanyo’s
financial firms and
investors
Mr. Iue
said at athat
newsare
conference,
adding
that the Mr.
slowIue
speed
of the
crucial to Sanyo’s
recovery,”
said
company’s reforms was a major
at a news conference,
that the slow
point ofadding
contention.
speed of the company’s
reforms
was
a
Last week,
Sanyo’s
chairwoman,
Tomoyo Nonaka, also resigned. Ms.
major point of contention.
Nonaka, a former television journalist, had been appointed in 2005 with
Last week, Sanyo’s
chairwoman,
Tomoyo
the aim
of bringing in
an outsider
Nonaka, also resigned. Ms. Nonaka, a
former television journalist, had been appointed in 2005 with the aim of bringing
in an outsider with a fresh perspective.
Sanyo Electric shuffle
the world is crucial to finding ways
to fight
the virus, while
Indonesia
Like many Japanese
electronics
com-
and other countries want to make
sure they have access to human vaccines at affordable prices.
A meeting of global health officials ended here yesterday, with ex-
Net profit/loss
Daily share price
In billions of yen
In billions of yen
Yesterday: 187 yen
¥4,000
¥100
¥800
1.32
3,000
0
600
–100
400
–200
200
Others
2,000
AFP
Toshimasa Iue,
current president
stepping down
next month
Sanyo
Seiichiro Sano,
currently vice
president and
president designate
Component
Commercial
1,000
Consumer
0
’04 ’05 ’06
–300
’02 ’03 ’04 ’05 ’06
Note: Fiscal years end March 31 of year shown
0
’02 ’03 ’04 ’05 ’06 ’07
Source: the company
panies,
Sanyo
is in too many different
also-ran,
squeezed
thehas
with
a fresh
perspective.
mobile phones, withhas
less become
than a 1% anants
such as Nokia
Corp.,in
which
Mr. Iue’s and
successor,
global
market share, and
29th in
flat- more
than a 35%
marketmanushare.
businesses
can’t Seiichiro
let go. Since
the
middle
between
low-cost
Chinese
Sano, 54, currently vice president, is panel LCD televisions, according to
the flat-panel television marcompany was founded 60 years ago as a
facturers and topIncompanies
such as Samexpected to act more aggressively to market-research firm iSuppli Corp. ket, Sanyo has become an also-ran,
bicycle-lamp
maker,
it
has
continued
to
sung
Electronics
Co.
Korea,
Sony
turn around the company, particu- It is losing market share to Taiwan- squeezedof
inSouth
the middle
between
lowlarly
though
he ese
rivals in digital cameras.
sales
cost Chinese
manufacturers
and top
add with
new divestitures,
products and
services
without
Corp. Its
and
Matsushita
Electric
Industrial
was
noncommittal
yesterday.
“As for
the year
getting
rid of weak
businesses.
That
is ended March
Co. 2006 were companies such as Samsung Elecfor the issue of selling our mobile- down 3.5%, to about $20.5 billion. In tronics Co. of South Korea, Sony
because
it
didn’t
want
to
lay
off
workers
phone and digital-camera [opera- the first three quarters of the cur- Corp. and Matsushita Electric Industions]…this
not something
year,
Saturday,
sales facing
trial Co.Sanyo are more severe
by closingisoperations.
It that
didn’trent
want
towhich endsThe
problems
can
be decided
lightly.that
I am were
still setfell 5.7%.
Sanyo saidthan
in November
The the
problems
facing
Sanyo are
shed
businesses
started
by the
those affecting
rest of
Japan’s
tling on a plan for fiscal 2007,” Mr. that it expects to post a loss of about more severe than those affecting
revered
founder,
and
it
wanted
to
remain
electronics
industry,
but
its
bigger
rivals
Sano said.
$420 million this year, reversing ear- the rest of Japan’s electronics inin Like
mainstay
domestic
productslier
such
as
facing similar
difficulties
pulling
many Japanese
electronics
expectations
for are
a profit.
dustry,
but its bigger
rivals out
are faccompanies,
Sanyo
in too many
In mobile phones,
area businesses.
that ing similar
pulling out
rice cookers
andis televisions.
ofan
weak
Thatdifficulties
means Japanese
different businesses and can’t let Sanyo has identified as crucial to its of weak businesses. That means
companies end up being too small in each
go. Since the company was founded revival, it was late in launching an ul- Japanese companies end up being
Having
portfolios
allows companies
product
become
market
60
years vast
ago as
a bicycle-lamp
traslim phone overseas.
That segment
hurt too to
small
in eachaproduct
segment
maker,
it has
continued
add new Sanyo,
which was already
to become
which
to take
profits
fromtosuccessful
businesses
leader, handiwhich they
need atomarket
do in leader,
today’s
products
services
without getcapped by
its size compared
with gi- environment,
they need to dosays
in today’s
competito moveand
into
new growth
businesses,
but
competitive
Fumiaki
ting rid of weak businesses. That is
it also limits
the
resources
that can be
Sato, a Deutsche Bank AG analyst who
because
it didn’t
want
to lay off
workers
operations.
It Meanwhile,
devotedbytoclosing
any one
product.
recently wrote a book on restructuring
didn’t
want toto
shed
businesses
thatacross the
the ability
spread
losses
the electronics industry. They are “in an
were started by the revered
company
minimize
the impact
also puts
uneasy place in the middle,” he says.
founder,
andto
it wanted
to remain
in
off a sense
of crisis
-- sometimes
until it is
mainstay
domestic
products
such
as
rice
cookers
and televisions.
too
late
to react.
Meanwhile, the domestic market is
Having vast portfolios allows
crowded with more than a dozen competicompanies to take profits from sucAs a result
of this
grow-at-any-cost
tors in a single product. For example, in
cessful
businesses
to move
into new
growth
businesses,
also limitsweak and
strategy,
Sanyobut
hasit become
mobile phones, Sanyo competes with 14
the
resources that
can be
devoted
to
unfocused.
Aside
from
batteries,
of which
other firms for a small slice of the Japanese
any one product. Meanwhile, the
it
has
top
market
share,
Sanyo
is
a
small
market, which is about 5% of the global
ability to spread losses across the
player intomost
of itstheproducts.
market. In rice cookers, eight companies
company
minimize
impact It ranks
also
puts
a sensephones,
of crisis—some13th
inoff
mobile
with less than a 1%
are vying for a share of a $100 million
times until it is too late to react.
global
market
share,
and 29th in flat-panmarket.
As a result
of this
grow-at-anyel LCD
televisions,
according
cost
strategy,
Sanyo has
become to marketweak
and unfocused.
Aside from
bat-It is losing
research
firm iSuppli
Corp.
Such heavy focus on the hypercompetitive
teries, of which it has top market
market
share
to
Taiwanese
rivals
in
digital
domestic market weakens the companies’
share, Sanyo is a small player in
cameras.
Its sales
for the
ability to compete globally. It has led to a
most
of its products.
It ranks
13thyear
in ended
Pure Performance
March 2006 were down 3.5%, to about
$20.5 billion. In the first three quarters
of the current year, which ends Saturday,
sales fell 5.7%. Sanyo said in November
that it expects to post a loss of about $420
million this year, reversing earlier expectations
for ainfluenza
profit. surveillance
the
global
Indonesia reports three deaths
from avian flu after WHO deal
Mr. Iue’s successor, Seiichiro Sano, 54,
currently vice president,
expected
A WALL STREETisJOURNAL
NEWS Rto
OUNDUP
JAKARTA—Indonesia
act more aggressively
to turn around the announced three more deaths from
company, particularly
divestitures,
the H5N1with
bird-flu
virus yesterday, a
though he was noncommittal
yesterday.
day after Indonesia
agreed to resharingour
virusmobilesamples for re“As for the issuesume
of selling
search in exchange for a World
phone and digital-camera
[operations]...
Health Organization compromise
this is not something
thatwon’t
can be
that access
be decided
extended to
companies.
lightly. I am stilldrug
settling
on a plan for fisWHO
and other experts say sharcal 2007,” Mr. Sano
said.
ing samples with scientists around
Sales by product group
tive env
Sato, a D
who rece
structuri
try. They
the midd
Meanw
is crowde
competito
example,
competes
small slic
which is a
ket. In ric
are vying
lion mark
Such h
competiti
ens the c
pete glob
in profita
since the
Japanese
Mr. Sato
even a h
struggling
erating p
Samsung.
Analy
opportun
start agg
businesse
created a
pany last
selling th
try obse
consider
mobile-p
they bec
any inter
c
Absolute P
decline in profitability across the industry since the early 1980s, the heyday of
Japanese electronics makers, says Mr. Sato
of Deutsche Bank. Indeed, even a heavyweight like Sony is struggling to achieve
a 5% annual operating profit margin, half
that of Samsung.
Navitimer World
The Breitling cult chronograph, GM
network, improve access to safe
Officially chronometer-certified by t
and effective H5N1 and other potenIn
mobile
phones,
an
area
that
Sanyo
Analysts
say
Sanyo
still
has
an
opportunity
tial pandemic influenza vaccines
has
identified
as
crucial
to
its
revival,
it
to
recover,
but
it
must
start
aggressively
and try to boost the number of hightech
laboratories
in
wasWHO
latereference
in launching
an ultraslim
phone
shedding more businesses. In a major
developing
overseas.countries.
That hurt Sanyo, which was
step, Sanyo created a wholly owned chip
Indonesian President Susilo Bamalready
handicapped
by
its
size
compared
company last year as a precursor to selling
bang Yudhoyono urged delegates to
with on
giants
Corp., which has
that business. Many industry observers say
agree
fairersuch
waysas
to Nokia
distribute
bird-flu
medicines
andmarket
vaccines.share.
more than
a 35%
it should also consider selling its appliance
An Indonesian Health Ministry
and mobile-phone businesses before they
official yesterday confirmed that a
www.breitling.com
In the flat-panel
become too weak to attract any interest.
15-year-old
boy, a television
22-year-oldmarket, Sanyo
woman and a 39-year-old man had
died from bird flu.
In Indonesia, one of the countries hardest hit by the H5N1 virus
strain, bird flu has killed 63 of the
national companies.
U.S., and Bush promised to
of the biggest U.S. bank by market
surpassed
GM it
forset
the to the
Source: The company
available
*85.6% (Citigroup-led consortium)
doesn’t comment on uals would
start investingN.A.=Not
in shares.
modest
goal
sell 200,000 tion, saying it capitalization.
irst time in quarterly sales, sell- veto the latest war-spending
bill
taking
shape
in
Congress.
sales.“Our
only is
in the
U.S. this year. Toy- other auto makers’
Tomorrow,
Citigroup
ex-Merrill’s acquisition, made in
Corporate
News
ng 2.35Tundras
million vehicles
to GM’s
to 1win
a contentious
six- proved to be ill-timed. After
be No.
in terms
of 1998,
ota has
cited the
na- objective
.26 million,
underscoring
a pro-competitive
n Gunmen attacked
a Chinese- is topected
week
campaign
to
buy
control
of
ound industry
run
oil field in Ethiopia,
killing
quality.
We’ll let
the numbers speak the
deal, the local stock market the joint venture, creating factions
ture ofshift.
thePage
U.S.1 pickup
market.
Japanese brokerage house Nikko
74
workers,
including
nine
Chin An Indonesian
court recently
acquitToyota
announced for themselves,” a spokesman said. continued a long sag that dragged within the investment bank.
nese and over 60 Ethiopians,
ed Newmont
the head
of
Toyota sold 2.35 the benchmark Nikkei Stock Averplansand
to build
a plant
in
Mississippi
Consultants also say Citigroup’s
Chinese
media reported. World-wide,
Page 2
ts Sulawesi mining operation
Better
days
million
vehicles
in
the
January-toage
to
its
lowest
level
since
Japan’s
capable
of charges,
producing
vehilong
history of integrating compaf criminal
pollution
in 150,000
n Hamas militants in Gaza
Cordial raised its outlook
Byinitially
Amy
Chozick
NorihikoShirouzu
-March
25 April
2007 Nikko
period,
topping
the 2.26 mil- asset bubble burst in the early nies—it has bought stakes in seven
cles,
Toyota
Highlander
closely
watched
case.
Page
2and pelted
Israel with rockets
and
and said profit rose 38% ...........21
for the
timevehicles
in
GM sold in the same pe- 1990s, discouraging individuals foreign
sport-utility
vehicles,
starting
infirstlion
companies
since
n U.S. stocks
rose slightly
early mortars
five months, retaliating for Is- riod. GM has been the
Toyota
Motor Corp.
surpassed
from
investing.
2010.
AtAsian
oneMotor
point, how2004—suggest it is less likely to
fternoon.
Most
markets
Toyota
rising
manufacturing
costs
in
the
U.S.
A
other
auto
raeli raids in the Palestinian
General Motors
Corp.
in quarterly
Cordial
a 63-year-old
ell, butever,
indexesToyota
in Shanghai
No.Corp.,
1 auto
maker comCitigroup
may be
able
to side- Global
had been
stumble
in Japan.
quarterly
car sales
key
reason
Tupelo,
Missismakers’
territories and leaving a largely world’s
sales
for the first time,
underscoring
pany
caughtToyota
up in anpicked
accounting
nd Seoul set Corp.
records.surpassed
Page 23
than
70
years.
step
some
problems
because
it has In millions
considering
aMotors
plant that
Still,ofthey
say the giant bank will
vehicles
successful Gaza truce in doubt. for more
theeighth
profound
shift that
has occurred
scandal.
The
deal
could
be will
valued
General
sippi,
as
a
site
for
what
be
an
sales.”Our
n China warned U.S. complaints
The
quarterly
fig- Cordial
been
Japan
long
time,
consultwould
openin
a year earlier
need to move
inwas
the
globalaauto
industry
domat $14
billion ifsales
allassembly
Nikko
Toyota slowly
GM to prevent rufn China unveiled new rules
Corp.
North
American
plantin
only once
objeco the WTO over
productquarterly
piracy
shares
are tendered,
making it ants
Citi- say. It already does business
released
yesterday
and build
one-third
more
fling the feathers of Nikko Cordial’s
2.5
that will require government uresrelatively
nd media-market
could
salesbarriers
for the
first
lower
wages
the
area
offered,
he
tive
is
to
group’s the
largest
foreign
acquisition.
By Amy
Chozickthrough
in Tokyo and
bodies to make information
represent
first
time
with Nikko
Cordial
vehicles.
staff. An exodus of staff could cost
urt trade
relations. Page 10
time, underscoring
saidThe
indeal
Tupelo
Another
concern,
beinNo.
1a joint 2.0
wouldlast
makeweek.
Citigroup
JaNorihiko
Shirouzu
Detroit
but some information
n China should
more forToyota
has
surpassed
GM
venture.
That
entity,
Nikko
Citi- Citigroup one of the acquisition’s
Mr.invest
Watanabe
said public,
he
pan’s
third-biggest
brokerage
house,
will
remain
off-limits.
Page
10
the
profound
shift
he
added,
is
the
relative
inflexibility
of
in
terms
ign-exchange reserves in gold
1.5
in global
sales
for a
three- Inc. group
Ltd., by
was
formed
is concernedaabout
rising
most important assets: the client reDetroit’s
Big eight
Three. years
behind
Nomura
Holdings
and inated
nd strategic resources,
central- n Police said at least 22 peothat has occurred
assembly
plants
in North
America.
While GM of
Daiwa
Securities
Group
with and Surpassing
in quality.
total
worldperiod.
Analysts
sayInc., ago
handles merger
advisory
manufacturing
costs ple
in have been killed in violence month
lations Nikko Cordial bankers have.
ank official
believes. Page 11
1.0
in
the
global
auto
some
plants
in
Japan
are
capable
of
proWe’ll
let
the
businesses
covering
wide sales,underwriting.
albeit for one quarter,
a matter
of cash
timemerger
be- adviand securities
In the
the U.S. A key reason ToyAt the same time, Citigroup
linked to campaigning for the it is just
n Vedanta Resources bought
sory,
corporate
management
caps
a
remarkable
surge
by
Jaindustry
onceMissisdommore than auto
a half-dozen
different
numbers
Philippines’ local and congres- foreducing
theindividual
Japanese
year ended
March
31,maker
2006,
ven- 0.5
ota picked
Tupelo,
needs to make sure it has a handle
1% of Indian
iron-ore
producer
and
investors.
pan’s No.
1 auto
bythe
output,
by
models
on theGM
same
line, most
U.S.
plants
speak
for half
sional elections set for May 14. maker
esa Goa
frominated
Mitsui
Co.Detroit’s
of what
surpasses
in
its
ture—in
which
Cordial
sippi,
as a &site
for
on
all of Nikko Cordial’s busiSuccess in Japan
is particularly
which
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little more
thanowns
0
apan for
$981
million.
Page
3
Big
Three.
can
produce
a
single
model
and
its
closely
themselves,”
important
as
Citigroup
is
accelerat1Q
2Q
3Q
4Q as
1Q Nikko will
GM’s
world-wide
sales
volume
a
n
A
serial
rapist
received
life
annual figures. Toyota 51% and Citigroup holds 49%—had
will be an eighth North
nesses,
especially
2006
2007
ing its pushsister
overseas.
Concerned
dozen
years
But
also is
in prison in Japan for nine at- leads
associated
vehicle.
“It’s
not
anbillion
im- ago.
a Toyota
spokesn BP said
its first-quarter net
in
nearly
every
other
about
$1.1
in
net
revenue.
It
American
assembly
need
to
convert
its
books
to U.S. acthat growth in the U.S. has reached wrestling with some of the chalbut was cleared of rapSources: the companies; WSJ research
ell 17% to $4.66
billion on a 3.3%
Surpassing
GM intacks,
mediate
risk,
but we
need
to drive down
man said.
Katsuakia British important
such
was
relatively
its limit,measure,
Chief Executive
Charles lenges of being big: The company
ing and dismembering
rop in plant
revenue, hurt
by lower
world-wide
cost
and
more
flexibility
ourbigger recalls in the U.S.,
Prince
haspump
set
a goal
of
raising
the into
Watanabe
cash
reserves
and
lower
wages
the
woman after
a six-year trial. as profit,
has had
il prices
and total
output.
Page
7 area ofbank’s
revenueMr.
fromWatanabe
foreign marits
engineering
staffs
are straining fited for years from a legacy of missales,
albeit
for
plants
here,”
said.
World-wide,
market
capitalization.
fered,
he
said
in
Tupelo
n The general in charge of
n Alliance Boots said it would
takes
by Detroit’s
autoin
makers—to
kets to 60% from the current 44%. to keep pace with aToyota
growingsold
array2.35
quarter,
capsU.S.
million
vehicles
the
forces inhe
South Korea
said said in December that it
Toyota
lasta one
week.
Another
concern,
ecommend
$22.05
billion
bid
Its biggest foreign deal so far: a of vehicles and it has become a tar- emerging markets such as China and
North
Korea could
a produce
rom KKR
andathe
remarkable
surge
by Japan’s
1 autoto
Toyota
decided
last
year
to delay
introJanuary-to-March
period,
topping
the
plans
million
vehiadded,
isU.K.
theretailer’s
relative
inflexibility
ofNo.become
$12.59.42
billion
acquisition
of MexiIndia,
where
GM
is
a
more
muscular
get
for
criticism
by
some
environeputy chairman, leading a rival moderate nuclear power by
co’s Grupo
Financiero
Banamex-Accompetitor
energetic
auto
mentalas
groups.
cles
and
9.34
million
vehicles
makerplants
by
output,
which
had a little
more
of
some
models
by as much
2.26 million vehicles
GMand
sold
in thelocal
same
in North
America.
2010
if disarmament
talks
fail. sell ductions
roup toassembly
drop its offer.
Page 4
cival
inyear
2001.
Back
then,
foreign
revare
learning
how
to compete
Moreover, the battle
for GM
domi-hasmakers
world-wide
in
2007.
Last
year,
Toyhalf
GM’s
sales
volume
half
a
to
slow
the
pace
of
product
period.
been
the
world’s
No.
1
Whilethan
some
plants
in world-wide
Japan
are
capan The U.N.’s Ban arrived in
n Canon said its net rose 21% to
enue was just 35% of the bank’s nance in the world auto market go- by reading Toyota’s playbook.
ota
produced
9.02 million
vehicles
ble of
producing
than
atalks
half-on
dozen yearsmore
ago.Syria
Butfor
Toyota
also
is wresdevelopment
engineers coulding
conduct
auto
than
years.
gaining
sup1.11 billion,
a afirst-quarter
overall
revenue.so
forward will shift
awaymaker
from thefor more
In the
U.S.,70
where
Toyota owns
and
sold
while
GM proan
international
court 8.8 million,
ecord, dozen
as sales
rose with
13%. Page
6 ofport
different
models
on for
the
same
Japan
has proved
a tough
tling
some
the
challenges
of
being
more
quality
checks,
suchmaras building
proU.S. market—where
Toyota benePlease turn to back page
tohas
try
thosebigger
accused
of killing
ket for many
multinational
duced
9.18 million
vehicles
and in an interview last
U.S.company
plants
can
produce
a recalls
big:
had
in
totypes.
Mr. savvy
Watanabe
The quarterly sales figures released
n Yahooline,
Chinamost
wasThe
ordered
by
Lebanon’s ex-leader Hariri.
companies
that have failed to grasp
Beijingsingle
courtthe
tomodel
pay
damages
sold
9.1 million
vehicles.
and
its closely
associU.S.,
its engineering
staffs
are
strainyear
said
his
engineers
in
some
cases
may
yesterday represent the first time Toyota
n A Syrian
court
convicted
its business culture and quirky regf over $27,000 for providing illeMuch
growth
incommon
the skipping
ated sister
vehicle.
“It’s
not an immeprominent
rights activist
An- of Toyota’s
ing tolinks.
keep
pace
have
rushed
products,
checks
has surpassed GM in global sales for a
ulations.
Among
the
misal music-download
Page
4 with a growing array of
war
al-Bunni
of
disseminating
U.S.
over the and
past
15dictating
years
has
been
takes:
from
theon
head
ofdiatevehicles
risk, but
we
need
to drive
and
it
has
become
a
target
for
relying
too
much
computer
simulathree-month period. Analysts say it is just
n AT&T’s net nearly doubled
hostile information and
sen-by increasing
fice how
local operations
be
driven
Americanshould
cost when
andby
pump
flexibilcriticism
environmental
groups.
tions
toNorth
assure
He noted
Toyota
a matter of time before the Japanese auto
rom a down
year earlier,
re-somemore
tenced
him to five years
in jail.
run, ignoring
the quality.
needs of Japan’s
has six
assembly
ity into
our
plants here,” Mr. Wa- production. Toyota
ults didn’t
include
BellSouth
was
ready
to
hire
8,000
engineers
globally,
maker surpasses GM in its annual figures.
Please
turn
to
back
page
n Tamil rebels bombed govr all oftanabe
Cingular.
Page 6
plants
in North
withconduct
a total more of the quality
said.
Moreover,
the battle
for dominance
in Lanka
in America
part to help
Toyota leads in nearly every other imporernment
positions in Sri
production
capacity
of
1.8produce
million ven MinshengToyota
said
first-quarin
theirgoing
airstrike.
decided
year
tosecond-ever
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autolast
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forward
will
checks
and
more
prototypes.
tant measure, such as profit, cash reserves
er net rose 47%, reflecting lenda year, andMarketplace
it expects output to
introductions
offrom
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n
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a lower
tax burrisegovernto 2.2 million by 2010 as new
between
and
as half
a Page
year8to slow
theinsurgents
pace
en for much
the Chinese
bank.
Toyota
benefited
for
years
from
a
legacy
Gary
Convis,
a
senior
Toyota
North
ment troops, despiteplants
a plea by
come on line. At Toyota’s
of product
development
so engineers
of mistakes
by Detroit’s
makers
American
manufacturing
Toyota said in December that it plans
the U.N.’sauto
Ban for
anlaunch
end--toto
viWhat’s
the
gadget
that executive, insists
of its 2007
Tundra
pickup,
Markets
12 conduct
p.m. ET
could
more
quality
checks,
olence
has killed
over 350.
emerging
such that
as China
and
Toyota vehicle quality in North America
to produce 9.42 million vehicles and sell
NET markets
PCT
n Toyota
Toyota seizes
Toyota seizes No. 1 spot as quarterly
salesNo.
top1 spot
GM
as quarterly sales top GM
www.db.com
Japan’s eye-opener
has Madonna
and other
produced at its plant
in San Antonio,
CLOSE
CHG prototypes.
CHG
such
as building
Mr.
WaIndia,
where
GM nisDied:
a more
muscular
comis on a comeback. Toyota’s overall defects
David
Halberstam,
73,
9.34 million vehicles world-wide in 2007.
Last year, Toyota produced 9.02 million
vehicles
and soldmarkets.
8.8 million, while GM
At the centre
of Asia’s
produced
9.18
million
vehicles and sold 9.1
At the leading edge.
million vehicles.
In the U.S., whereVerdict
Toyotain
owns
about
16%
For GM,such
Toyota’s
coup could potenin emerging
markets
as China
Indonesia
was-0.25
ready
to hireyear,
8,000
en vs. $ noted
¥118.41
ofToyota
the-¥0.30
market
so far
areIndia. China,
tially
be alast
plus,
as surChairman and Chief
Much of Toyota’s growth in the U.S.
Thethis
acquittal ofthere
a mining
and
which
year
engineers
in part
to help
conNymex crude
$65.23 globally,
-1.00
executive
sets
theisstage
for JapanExecutive
signs -$0.66
the Japanese
auto
maker
becomRick Wagoner tries to
over A
the
past 15 years has been driven
passed
to becomeOfficer
the world’s
Passion to Perform.
more
of the
quality
checks
and Page 13
more
investment.
Money &duct
Investing
>more
Page
19
ing
cautious
about
the
prospects
accelerate
cost cutting
by increasing North American producsecond-largest
vehicle market
after and improve North
produce more prototypes.
for future growth. The company isthe
trying
American
profitability.
tion. Toyota has six assembly plants in
U.S., is GM’s
biggest
overseas GM is on track to
Gary Convis, a senior Toyota market and one of its most successto achieve a 10% operating-profit margin
slash fixed costs this year by $9 billion
North America with a total production
North American manufacturing exec- ful operations. Last year, GM’s sales
globally in the medium to long term, an
compared with 2006, but analysts say
capacity of 1.8 million vehicles a year, and
utive, insists Toyota vehicle quality in China rose 32% to 876,747 units.
objective President Katsuaki Watanabe
GM needs to cut almost as much again.
it expects output to rise to 2.2 million
in North America is on a comeback. The company plans to launch 10 new
laid out last year. Toyota is pursuing a
For more than a year, GM has pursued a
by 2010 as new plants come on line. At
Toyota’s overall defects per 100 vehi- or upgraded models this year.
pricing strategy that, as one senior execustrategy of cutting capacity and forgoing
Toyota’s launch of its 2007 Tundra pickup,
cles, a quality measure Toyota and
But Toyota
is a looming
threat.
tive
puts
it,
aims
to
squeeze
out
as
much
low-profit
sales
to
U.S.
rental
fleets,
efproduced at its plant in San Antonio,
many other auto makers use, is down During the Shanghai Auto Show
profit2002,
as possible
from says.
its product lineup.
fectively acknowledging that it was paying
American Toyota executives stressed that
40% from
Mr. Convis
last weekend,too
Executive
Vice to
Presia
high
price
be
No.
1.
the pickup is “made in Texas, by Texans,
For GM, Toyota’s coup could po- dent Yoshimi Inaba said the comBut be
onea of
Toyota’s
most important
new
for Texans.”
tentially
plus,
as Chairman
and pany
plans to“It’s
aggressively
expand
models,
the
big
Tundra
pickup
truck,
has
better
to
sell
four
million
[vehicles]
Chief Executive Officer Rick Wag- its sales and production in China,
to a slowcost
startcutting
despite increasat $5,000 profit [each] than five million at
In addition to the key U.S. market, Toyota
oner gotten
tries tooff
accelerate
aiming to sell
more
than
400,000
ingly
large
discounts.
Masaki
Taketani,
no
profit,”
General
Motors
Vice
Chairman
has been making a big push in emergand improve North American prof- vehicles in China this year.
a senior
at CSM
said
Bob Lutz said this year.
ing markets such as China and India.
itability.
GM analyst
is on track
to Worldwide,
slash
Toyota
is
facing
a
risk
of
falling
short
of
China, which last year surpassed Japan
WSJ.com
fixed costs this year by $9 billion
meeting
a relatively
modest
goal it set to
GM spokesman John McDonald said
to become the world’s second-largest
compared
with
2006, but
analysts
Tracking
shares
sell
200,000
Tundras
in
the
U.S.
this
year.
GM
set
a
sales
record
in
the
first
quarter
vehicle market after the U.S., is GM’s bigsay GM needs to cut almost as
WSJ.com thanks
subscribers
see in emerging markets.
competitive
to can
growth
gest overseas market and one of its most
muchToyota
again.has
Forcited
morethe
than
a year, nature of
historical “We
highlights
and track
the pursued
U.S. pickup
market.of cutwelcome
the competition and the
successful operations. Last year, GM’s
GM has
a strategy
auto makers’
shares
overour
thecompetitors, but we’re not
rivalry
with
sales in China rose 32% to 876,747 units.
ting capacity and forgoing lowpast year
and decade,
at distract us from building
recently
announced
going
to let that
The company plans to launch 10 new or
profitToyota
sales to
U.S. rental
fleets, plans
ef- to build WSJ.com/Autos
a plant
in Mississippi
capable
the best cars and trucks that we can for
upgraded models this year.
fectively
acknowledging
that
it wasof producing 150,000 vehicles, initially Toyota
our customers . . . it’s just not about who’s
Highlander sport-utility vehicles, starting
No.1 or who’s leading. We need to be a
But Toyota is a looming threat. During
in 2010. At one point, however, Toyota had
strong competitor.”
the Shanghai Auto Show last weekend,
been considering a plant that would open
Executive Vice President Yoshimi Inaba
a year earlier and build one-third more
Analysts say Toyota has purposely been
said the company plans to aggressively
vehicles.
playing down its ascent to No. 1 in order
expand its sales and production in China,
to avoid a political backlash in the U.S.
aiming to sell more than 400,000 vehicles
Mr. Watanabe said he is concerned about
Yesterday, Toyota wouldn’t acknowledge
in China this year.
Understand more about business
its position, saying it doesn’t comment on
MARKET
American
Toyota
executives
stars raving?
> Page 27
Nikkei tanabe
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year
said
alast
U.S.local
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won a Pupetitor
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37
Nintendo
system
scores
Nintendo system scores with nongame software
with nongame software
Corporate News
DS device becomes a versatile study tool; English skills soar
By Yukari Iwatani Kane - 11 July 2007
deviceKYOTO,
becomes
Japan–Every morning
at 8:50, eighthersatilegrade
study
tool;
teachers at
Otokoyama
Higashi
glish skills
soar
Junior High School
the DS has become the fastest-selling portable videogame machine
ever in Japan, and not just because
of videogames. It also is used with
reference guides, digital books and
study tools like the English quiz.
Over the past year, the versatile debring out plastic
vice, which invites users to read, lisukari Iwatani Kane
games, which asked players -- kids mainbaskets stacked
Demand
nongame
ten,
writefor
and
speak to it, has
ly -- to dexterously use a plus-shaped
with
electronic
software
has
been
so
spurred
software
makers
to
flood
YOTO, Japan—Every morning
pad and buttons while peering
devices.
For
10
strong
that
even
trathe Japanese market with titlescontrol
on
50, eighth-grade teachers at
into a small screen, the DS was easier to
minutes,
122 studitional
videogame
diverse
topics
ranging from keepoyama Higashi
Junior
High
use, with voice-recognition technology
dents
use styluses
publishers
can no
longer
ing
a household
budget
to playing
ol bring out
plastic
baskets
and two big screens, one of which recogscrawl English
ignore
trend. the
Elecguitar
orthe
studying
famous Buded with to
electronic
devices.
nizes handwriting.
words
like
“womtronics
Arts
Inc.,
a
U.S.
dhist
scripture:
Heart
Sutra.
0 minutes, 122 students use
an” and
“tree”words
publisher
best known
for
Of the 500-odd
DS software
tises to scrawl
English
began to take interest when
on touch
graphically
tles
released rich,
or in fastthe works so Adults
far,
“woman” and
“tree”screens.
on touch
Nintendo released the quiz game Brain
Electronic
action
games
only
about
200like
are the
traditional vidns. Electronic
voicesvoices
beep rebeep responses
“MaddenNintendo
NFL” football
eogames.
is quick toAge,
li- which was designed to stimulate
ses like “Cool!”
if the children
rusty minds with a daily quiz that tests
likecorrectly,
“Cool!” ifand
the a Study tool: Nintendo President Satoru
cense
its“Need
DS device,
gameuses
and of
the
for so long
the word
they aren’t
violent
reflexes, memorization and speed-arithchildren
king “Come
on!” if spell
they the
get it Iwata with the DS videogame machine. asSpeed”
racing
seriesor
is otherwise
objectionable.
of the softg.
metic. A subsequent English dictation
word correctly, and
now tip-toeingMost
into this
ware
availablethis
overseas, but
he students
are tapping
away
game that helps improve listening
a mocking
“Come
area isn’t
by launching
game,” says Minori Yamanaka, a game
publishers
intendo Co.’s
DSthey
videogame
and spelling cemented the deon!” if
get it
month
in Japan believe
the firstthe trend
outside mand
Ja- for a new genre of DS
hine, a portable
device custom- 13-year-old student, during a short will
wrong.
of aeventually
three-part move
reference
reserved for games like Poké- break between classes. “Work pan.
software.
series on wine, sake and
sheets
such a pain.”
Nintendo
hasitsold
nearly 18 miland SuperThe
Mario
Bros. are tapping
students
awaywere
on Nincocktails. Electronic
Arts says
is conSince
its introduction
in
2004,
These exercises
feelDS
like
a
Please
turn
to
page 2
tendo Co.’s
videogame
machine,
a
sidering a version on wines for the French
portable device customarily reserved for
market.
games like Pokemon and Super Mario
Bros.
Nintendo, celebrated for the success of its
Wii videogame console introduced last
“These exercises feel like a game,” says
November, is rather cautious about trumMinori Yamanaka, a 13-year-old student,
peting the unexpected success of the DS.
during a short break between classes.
(The initials stand for Dual Screen.) And
“Work sheets were such a pain.”
while the company welcomes the surge
nongame
made
by others,
Australian leaders inspent
de- software
world get
wetter.
That has the govatrick Barta
Since its introduction in
2004,building
the DS reservoir
Nintendo
officials
stresslooking
that they
plan to course,
cades
systems
ernment
to change
become the tiny
fastest-selling portable
games even
and entertainment.
to stick
try tototurn
as farmers protest that the
EE WAA, has
Australia—This
videogame
vast expanses droughts haven’t gotten worse—
boomed for
the pastmachine
few de- ever in Japan, and
notofjust
becauseburof videogames. It also is of “Nintendo
obviously
likesurrounding
to sell
marginalwould
only
the politics
them.
s as the center
Australia’s
with reference
Mario andinZelda games
these
new and policy
ng cottonused
industry,
while the guides, digital books cropland
In the to
U.S.,
farmers
toolslarglike the English quiz.
Hirokazu
Hamamura,
itsusers,
harshtoo,”
inte- says
try becameand
onestudy
of world’s
makers
squabble
over how to keep
Overgovernment
the past year,
rior
into
an ag- of
the
president
Enterbrain.
Nintendo’s
xporters. With
en-the versatile device,
dwindling
water
resources like the
ricultural
invites
usersinto read, listen, write
agement, which
farmers
moved
Ogallala
Aquifer afrom
spokesman Yasuhiro
Minagawa,
23- disappearmecca.
But re- veteran,
s the country’s
river
ing. In China,
is struggling
and biggest
speak to
it, syshas spurred software
year company
admitsBeijing
that the
cent
years now
o grow themakers
thirstytocrop.
to keep
the Yellow
River—known
flood the Japanese market
big challenge
is to figure
out what
brought
ow Australia
is staggering
as thenumber
cradle ofof
Chinese
civilization—
with titles
on diverse topics ranging from have
to do
with the huge
nontradirecord
ugh one keeping
of its aworst-ever
from
out. of
The
household budget to playing
tional DS users.
“Thedrying
popularity
theAustralian
drought—and
ghts, and cotton
has
proposal
guitarproduction
or studying
the famous Buddhist
DS shows that government’s
the line between
enter-to preserve
predictions
meted. In Wee
Waa, the
Cotton
its Murray-Darling
River basin is
scripture:
Heart
Sutra.
tainment and education
is getting blurry,
that
climate
s Motel, which once was busy
one
of
the
most
far-reaching
anybut consumers are still buying games like
Malcolm
Turnbull
changes
from
seasonal workers,
now strugwhere:
It calls
Of the 500-odd
DS software
titles
reBrain Age
because
they’re
fun,for
so taking
it’s stillmanageglobal
warm- ment
to fill rooms.
Across
the
basin,
of water
from the local
leased
or in
the
works so far, only about
the entertainment
factor
thatrights
is imporing could make Australia’s interior jurisdictions that share the basin
aroos hop along
dry
levees,
and
200 are traditional videogames. Nintendo
tant,” says Mr. Minagawa, referring to a
Please turn to page 14
nds of giant
water-transport
while other parts
of the
is quick
to license uses even
of itsdrier
DS device,
popular
Nintendo game.
poke out over empty reserso long as they aren’t violent or otherin the flat landscape.
wise objectionable. Most of the software
Sony, meanwhile, doesn’t intend to follow
he drought’s severity and imisn’t available overseas, but game pubits big rival’s direction. The company
are spurring Australia, the
lishers
believe
the
trend
will
eventually
is trying to attract new game users to
d’s driest inhabited continent,
move
outside
its PlayStation Portable machines with
kle a problem
that
also isJapan.
starteasy-to-play games such as virtual
o afflict more-populous counNintendo
has water.
sold nearly 18 million DS
tennis. It says it will continue to focus
how to survive
with less
units in Japan, more than triple the sales
on games that show off its high-quality
of rival Sony Corp.’s PlayStation Portscreen and advanced technology.
according to market-research firm
n Other able,
Fronts
Enterbrain Co. More than 60% of the DS
DS was Kyoto-based Nintendo’s first
units were bought by people who don’t
attempt before the Wii to lure more
think of themselves as videogame users,
nongame players with fun, easy-to-play
r China’sEnterbrain
rural doctors,
said.
games. Unlike the company’s Gameboy
ustralia steps up drought fight
ates would lose water rights; sweeping plan worries cotton farmers
ourse of treatment
deo 38
classes are teaching
sic skills > Page 32
“Who would have thought an English
game would be a million seller?” says
Nintendo’s Mr. Minagawa.
Soon, a slew of other software companies
caught on to the idea and came out with
their own versions of nongame software.
One early DS fan was Yukimitsu Hayashi,
an assistant manager in Kyoto’s Yawata
school district, which now uses the DS in
its four junior-high schools. He thought
the device had qualities that might make
it an appealing educational tool, such as
a built-in microphone and handwriting
recognition. What is more, it cost less
than $150 -- a relative bargain compared with computers,
so it seemed affordable to classrooms.
There was another key advantage: It
was teacher-friendly. Despite Japan’s
reputation as a gadget-loving nation,
many schools, including those in Yawata,
were surprisingly dependent on paper.
Many teachers found computers to be a
nuisance because they necessitated preparing extra lessons and moving children
to a computer room. Some were even
intimidated by the computers. But the
DS could be used briefly and in the classroom. And it cut down on paperwork.
“It’s not like we’re letting the students
play games without supervision,” Mr.
Hayashi says. “I don’t even consider
them to be a game device. It’s a tool.”
To avoid potential controversy,
Mr. Hayashi introduced the
device cautiously. He secretly
approached IE Institute
Co., a Tokyo educational-software concern,
about making an
English-vocabulary program.
A year and a
half later,
Mr. Hayashi
showed the finished product to his colleagues and proposed a test. Educators,
including the principal of Otokoyama
Higashi Junior High, where the trial was
held last fall, were impressed with the
DS’s ability to pronounce words and
quickly recognize letters that were written
on the screen.
So far, Japan’s Ministry of Education is
taking a detached view of Yawata’s efforts.
It says it is up to each district what teaching tools they use, but it hastens to add
that the government isn’t endorsing them.
Still, the results of the five-month test
have been impressive. The school found
that nearly 80% of students who used the
DS each day mastered junior-high-level
competence in English vocabulary, compared with just 18% before. Almost half of
those students had developed 11th-gradelevel abilities. The school district is now
testing other software for subjects like
arithmetic and Japanese.
Otokoyama Higashi’s teachers aren’t
opposed to using the DS in classrooms,
but some remain a little skeptical. “The
students are enjoying it, and I’m not
completely against the idea, but I still
wonder how effective it is,” said Ikuko
Matsushima, an eighth-grade teacher.
Ms. Matsushima, who owns a DS and uses
software to review her knowledge of kanji
characters used in Japanese writing, believes the DS is fine to use as a self-study
tool but worries about the limitations of
the technology.
Understand more about business
39
cars,
potential
Smallbig
cars, big
potential for Asian manufacturers
New market model drives profit goals; Nissan values India
ian manufacturers
Corporate News
By Amy Chozick - 22 October 2007
del
ls;
dia
Next frontier
Nissan Versa
hatchback
Auto makers are scrambling to keep
up as world-wide demand for small
cars grows. World-wide production
of small cars compared to SUVs:
Nissan
30 million
p-secret
Nissan
r, chief
Tavares
mbitious
ensivece of now make
ith this
d seven
s of a
rocketadlights
ut dias just
ugh to
l of this
We still
have
rontier
after al-
Small cars
25
20 MONDAY, OCTOBER 22, 2007
SUVs
20
15
10
5
0
1997 ’98
’99 2000 ’01
Source: CSM Worldwide Inc.
’02
’03
’04
’05
’06
’07
’08
’09
’10 ’11
Forecast
’12
’13
most 20 years in which major car sales are exploding, first-time drivmakers dismissed such vehicles as ers are starting out with the smalla low-profit afterthought. As gaso- est, lowest-price cars.
is expected
to drop
ATSUGI,
Japan–At
a top-secret
session Global
line prices
keep rising,
consumer
demand for
small4%,
carstois10 million
vehicles.
on
car designs
Nissanare
Motor
Co. expected
tastes
around at
thea world
shiftto grow by 30% to 27 miltechnical
center,
chief
product
strate- lion vehicles by 2013, with the
ing toward
smaller,
more
fuel-efficient
cars.Tavares
In the U.S.,
drivers
are growth Toyota
comingMotor
mostlyCorp.
fromrecently
devel- said it may
gist
Carlos
recited
the compalaunch a
car priced
at around $7,000 as
trading
in sport-utility
according
to auto-reny’s
ambitious
new mission:vehicles
to sell an oping markets,
earlyCSM
as 2010,
aimedInc.
at large
like the Nissan Armada
search firm
Worldwide
De- developing
expensive-looking
small for
carsmaller
for the price
models
likemodels
the subcompact
Honda make
mand for
big SUVssuch
during
that time
countries
as Brazil,
Russia, India
of
no-frills
-- and somehow
Please
turn toChrysler
page 20LLC is tying up with
In developing
markets, where
and China.
aFit.
profit
on it.
China’s Chery Automobile Co. to make
small cars for export world-wide, includEngineers, grappling with this task for
ing the U.S. Small cars are expected to
a year, presented seven drawing-board
dominate many auto makers’ displays at
variations of a small car with a stylish,
the Tokyo Motor Show opening Wednesrocket-shaped body and oval headlights
day.
reminiscent of marquis-cut diamonds.
But the designs just weren’t inexpensive
The industry’s shift poses a challenge that
enough to make, said Mr. Tavares. “All
no car maker has managed yet to meet:
of
this is costly,” he grumbled.
“We stillments to
maternity-lingerie
brand called
retailers, including more
how
to makeboutiques,
decent profits.
have
a
lot
of
work
to
do.”
maternity
hos- Trucks and
Eve Alexander. All she needed was than 100
SUVs
earn stores,
10% to 20%
which for
the manufacturer.
pitals and
online
mostmargins,
remany popular models can mean $2,500
Small,
havetoabruptly
Forlow-cost
that, shecars
turned
Alibaba. cently Target.com.
$5,000
profit perAlibaba.
vehicle. Even the
become
the anext
frontier forChinese
the global For to
almost
a decade,
com, then
little-known
best-selling
small cars
auto
afterbecome
almosta20
years in com Corp.,
Webindustry,
site that has
signifiled by founder
Jacklike
Ma, Honda Motor
Co.’s
Fit and Toyota’s
which
major carfor
makers
positioning
itself atYaris
the subcompact
cant gateway
globaldismissed
trade. Onsuchhas been
earn margins
manufacturers
of just 2%
vehicles
a low-profit
the site,as
which
connectsafterthought.
small man- As
virtual nexus
betweenfor
China’s
manto 3%
-- about $300
per car. In emerggasoline
prices
keep rising,
consumer ufacturing
juggernaut
and buyers
ufacturers
in China
and elsewhere
the
carsits
are
sold with fewer
tastes
the world
are shifting
with around
potential
customers,
Ms. around ing
the markets,
world who
want
lowprofit-boosting
features, so car makers
toward
fuel-efficient
Ivanovsmaller,
found amore
supplier
in Hongcars.
cost goods.
Charging manufacturearn eventheir
less.products
“Most car
makers are conKong
make
brasinshe
ers to promote
and
In
the that
U.S.,could
drivers
are the
trading
sportto be doing
if they break even
wanted.
to customers
on well
its site
utility
vehicles like the Nissan Armadaservicessidered
on small cars,” says
TakakiitNakanishi, a
listings,
Now, she
spendslike
herthe
days
taking with English-language
for smaller
models
subcompact
now dominates
China’s
business-tocare ofFit.
herIntwo
childrenmarkets,
and herwhere
Tokyo-based
analyst
at J.P. Morgan.
Honda
developing
nights
hundreds
of catabusiness market. World-wide, it is
sales
arefulfilling
exploding,
first-time
drivers are
log orders
and the
arranging
Please
turn to back
page
Tokyo-based
Nissan,
44%-owned by
starting
out with
smallest, shiplowestRenault SA of France, has embarked on
price cars.
a particularly aggressive strategy. Nissan,
whose fortunes surged on its SUVs and
Global demand for small cars is expected
high-performance sports cars, now is
to grow by 30% to 27 million vehicles
trying to reinvent itself as a maker of lowby 2013, with the growth coming mostly
price “entry cars” aimed at the developfrom developing markets, according to
ing world’s hordes of first-time drivers.
auto-research firm CSM Worldwide Inc.
Far behind the leaders in China, Nissan
Demand for big SUVs during that time
is trying to forge ahead in India and
is set for Hong Kong IPO
gateway from China factories to buyers world-wide
A few
dianaprst time
Ma
gs and
start a
d
y
ea
40
e 35
Small cars
other emerging markets, where it says it
plans to offer a stylish car for $7,000 to
$10,000 as early as 2010 and then try to
get its starter price down to $5,000. It is
even exploring a venture with a maker of
electric rickshaws to make a $3,000 car.
new low-cost car retains what he calls the
“emotive” design of more upscale vehicles. It is important that an entry car not
be seen as the “emerging-market car,” Mr.
Tavares says, but rather something that
makes owners feel like they have entered
the middle class.
The 49-year-old Mr. Tavares is leading
to. get below $7,000 is
the charge for Nissan.
intense
T HThe
E WA
L L PortuST R E E TNissan’s
J O U Rplan
NAL
controversial, says Ashvin Chotai, head of
guese executive, described by colleagues
Asian auto-industry research at consultas having “gasoline in his veins,” races
ing firm Global Insight Inc. “Lots of peosingle-seat cars for fun and decorates
ple say the cost structure is just not feasihis sparse office with framed pictures of
ble.” But Nissan managers say Mr. Tavares
race cars. For his current mission, he has
sets tough goals and sticks to them. “Just
assigned Nissan engineers to study Rewhen you think cost is under control, he’ll
nault’s boxy, basic Logan model -- proflip to another topic and say the quality is
duced by the company’s Dacia affiliate
a problem or ‘I’m concerned about roomiin Romania -- for cost-cutting inspiraness,’” says Thomas Lane, corporate vice
tion. Yet Mr. Tavares also insists that a
NEWS INDEPTH
president of product planning. Every little
thing counts, says Mr. Tavares, who calls
building profitable small cars “the most
demanding exercise for an auto company.”
Mr. Tavares’s success is crucial for Nissan and 53-year-old CEO Carlos Ghosn.
When Mr. Ghosn took over in 1999, the
car maker, hampered by management
mishaps and a string of unattractive
models, was on the brink of bankruptcy
with an operating-profit margin of just
1%. Mr. Ghosn’s turnaround relied on big
models with wide margins. That sputtered
in the past year, leading to Nissan’s first
annual-profit decline in seven years in the
year ended March 31.
What is more, while Nissan focused on
boosting profit margins and gaining U.S.
s, big potential for Asian makers
T H E WA L L ST R E E T J O U R N A L .
THURSDAY, OCTOBER 18, 2001 DXX
NEWS IN DEPTH
Understand more about business
41
market share, it fell behind in the world’s
fastest-growing markets. Nissan entered
China nearly two decades after Volkswagen AG, the market leader there by passenger-car sales, and five years after No.
2 General Motors Corp.Ford Motor Co.
already produces and sells several small
cars in India, while Suzuki Motor Corp.
and Hyundai Motor Co. are Nos. 1 and
2 by sales volume there. Nissan last year
offered just one model in India and sold
a total of 199 cars, forcing a determined
game of catch-up. “We have to imagine
different ways of making low-cost cars,”
says Mr. Ghosn, who also heads Renault.
In 1998 Mr. Ghosn, then Renault’s head
of manufacturing and engineering, put
Mr. Tavares in charge of Renault’s most
crucial line of compact cars, the Megane
and Scenic series. Mr. Ghosn, a Brazilian-born Frenchman, and Mr. Tavares are
both native Portuguese speakers, though
they typically communicate in French and
English. The engineer had demonstrated
his small-car savvy while working on Renault’s tiny Clio II subcompact and other
models. Under his leadership, the Megane and Scenic got sportier, aerodynamic
grills and curvier trunks, and became
Renault’s most popular line, accounting
for more than one-third of the company’s
auto revenue in 2002. In 2004, Mr. Ghosn
sent Mr. Tavares to work on midsize
cars at Nissan, where he soon became an
executive vice president and a member of
the board of directors.
This past April, he effectively became Mr.
Ghosn’s No. 2 in Tokyo -- just after the
company reported its profit decline. Mr.
Tavares concluded that Nissan should
focus a lot more on emerging markets
to boost stagnating world-wide sales.
But competition was already heating up.
Rival Toyota, for instance, outsold Nissan
by more than 40% in markets outside
North America, Europe and Japan, with
1.2 million sales to Nissan’s 850,000.
Nissan had one secret weapon: the nofrills Logan, packed with little tricks that
lowered its production costs to just half
of Renault’s other small cars. Known
within the company as the “conquistador
car,” it has helped Renault enter more
than 50 markets and is built in seven
countries including Iran, Morocco and
Colombia. “This is a simple car that can
be produced everywhere in the world,”
says program director Gerard Detourbet.
At $7,000 to $10,800, the boxy car is one
of the best-selling models in the developing world.
42
Mr. Tavares urged Nissan engineers and
product designers -- used to designing
more expensive cars loaded with features
for the U.S. and Japan -- to memorize
everything about the lowly Logan, down
to how costs were trimmed for each part
and how much each part costs to ship.
For instance, the Logan has a bumper
and grill that are one continuous part,
which Renault says can cut the cost of
the front end by roughly half, though it
raises the price of repairing front-end
damage. Rear-view mirrors on the right
and left side of the car are almost exactly the same, and the windshield is less
curved than other models, also cutting
costs by about half because the parts are
simpler to develop and produce, Renault
says.
Nissan is applying some of those benchmarks to its pear-shaped Tiida subcompact, currently its best-selling compact
car world-wide, and known as the Versa in
the U.S., where it starts at $12,630. On a
visit to a factory in Thailand last year, Mr.
Tavares noticed that the complex shape of
the Tiida’s door panels meant that half as
many Tiida doors as Logan doors could be
stacked in a shipping container. His product planners said the costlier Tiida needs
more complex doors than the Logan, he
recounted, but “I told them, ‘Let’s be
serious,’” Mr. Tavares says. He told them
to start “making sure, when you design a
part, that they can be piled together.”
Finding cost cuts on the Tiida has helped
product planners apply the change in
thinking to new models, he says; they are
focusing on details such as how much a
certain kind of speedometer or door handle will add to production costs. Japanese
auto makers also have been in a heated
race to build the roomiest small cars, and
Nissan engineers are working on ways to
comfortably fit luggage and five passengers without making the car bigger and
heavier overall.
Mr. Tavares hopes for a big payoff in India, where just eight of every 1,000 adults
owns a car and car sales are growing by
about 18% a year. Analysts estimate about
80% of 1.3 million cars sold last year were
small cars.
Nissan plans to build entry cars for India
and nearby emerging markets in a new
factory to be jointly owned with Renault
and Indian jeep maker Mahindra &
Mahindra Ltd. Some would eventually be
exported to developed markets in Europe
and elsewhere, though those would have
to comply with tighter safety and environmental standards. Nissan says it could
ultimately produce and sell a car in India
for as little as $5,000, and it has started
working with partners Renault and
Indian electric-rickshaw and motorcycle
maker Bajaj Auto Ltd. to try to come up
with a $3,000 car.
India’s Tata Motors Ltd. already plans a
“people’s car” next year that it says will
cost 100,000 rupees, or about $2,500.
Analysts and competitors say massive
scale would be needed to turn a profit,
and Tata’s initial sales target is two million units over the first five years. Tata
will give few details about the car, but a
spokesman says it will have four doors,
four to five seats and a 660 cubic-centimeter rear engine, similar to the size
used in “minicars” sold in Japan.
There also has long been a $5,000 car
in India, built by Suzuki and its Indian
partner, Maruti Udyog Ltd., whose joint
venture holds more than half the entire
Indian car market. The Maruti 800 lacks
the pizzazz Nissan seeks. Its rudimentary
design is basically unchanged since it
was introduced in 1983. It took around
10 years to become profitable, eventually accounting for nearly 80% of cars
Continued from first page
is expected to drop 4%, to 10 million vehicles.
Toyota Motor Corp. recently said it may
launch a car priced at around $7,000 as early
as 2010, aimed at large developing countries
such as Brazil, Russia, India and China.
Chrysler LLC is tying up with China’s Chery
Automobile Co. to make small cars for export world-wide, including the U.S. Small
cars are expected to dominate many auto
makers’ displays at the Tokyo Motor Show
opening Wednesday.
The industry’s shift poses a challenge
that no car maker has managed yet to meet:
how to make decent profits. Trucks and SUVs
earn 10% to 20% margins, which for many
popular models can mean $2,500 to $5,000
profit per vehicle. Even the best-selling
small cars like Honda Motor Co.’s Fit and Toyota’s Yaris subcompact earn margins for
manufacturers of just 2% to 3%—about $300
per car. In emerging markets, the cars are
sold with fewer profit-boosting features, so
car makers earn even less. “Most car makers
are considered to be doing well if they break
even on small cars,” says Takaki Nakanishi, a
Tokyo-based analyst at J.P. Morgan.
Tokyo-based Nissan, 44%-owned by
Renault SA of France, has embarked on a particularly aggressive strategy. Nissan, whose
fortunes surged on its SUVs and high-performance sports cars, now is trying to reinvent itself as a maker of low-price “entry
cars” aimed at the developing world’s
hordes of first-time drivers. Far behind the
leaders in China, Nissan is trying to forge
ahead in India and other emerging markets,
where it says it plans to offer a stylish car for
sold annually in India by the mid-1990s,
but its peak may have passed. Last year,
Maruti Suzuki’s slightly more upscale
new model, the Alto, which sells for $700
more, was twice as popular.
Nissan hopes its down-market strategy
will eventually increase profits by building
brand loyalty, so entry-car consumers will
eventually trade up to a fatter-margin
Nissan model. By contrast, rival Honda
doesn’t want to compromise its brand
image by selling a model cheaper than its
$17,000 City subcompact in India. Honda
can count on its motorcycle sales to build
its identity in developing countries. “We
believe people will pay a premium for our
cars,” says Takanobu Ito, Honda’s chief
operating officer of automobile operations. Likewise, Toyota pushes its Corolla
in emerging markets. But it acknowledges
that its $23,000 price tag is too high, and
it is looking at changing tack with a lowcost car. “Maybe we’re behind” on that
trend, says a company spokesman.
in place of longtime Japanese suppliers.
This year at its Thailand plant, Nissan cut
its parts imported from Japan to 10% from
an already-low 30%. It also is soliciting
more local staff and input instead of relying on designers and engineers in Japan:
Nissan and Renault plan a joint business
center in Chennai, India, in early 2008.
Mr. Tavares says he hopes local input
will help designers cut costs and generate
sales by offering only features consumers
want in each country.
At a recent corporate-strategy meeting to
discuss the company’s plans in India, Nissan executives spoke determinedly about
turning India into a global small-car hub.
But when people within Nissan challenge Mr. Tavares on his plans, he says
he reminds them what Renault did with
the Logan. “Any time you need to achieve
a cost breakthrough, people will tell you
that it’s not possible,” Mr. Tavares says.
Nissan also is moving production to lowcost areas and using more local suppliers
T H E WA L L ST Rsan m
goals
think
other
or ‘I’m
Thoma
produ
says M
able s
cise fo
Mr.
and 5
Mr. Gh
hampe
string
brink o
margi
lied on
sputte
san’s
years
A Nissan Motor employee, top, works on an assembly line at the Oppama factory in Yokosuka, south
Wh
of Tokyo. Above, the subcompact Honda Fit has attracted fuel-conscious U.S. motorists.
boosti
ket sha
growi
$7,000 to $10,000 as early as 2010 and then filiate in Romania—for cost-cutting inspira- nearly
try to get its starter price down to $5,000. It tion. Yet Mr. Tavares also insists that a new the m
is even exploring a venture with a maker of low-cost car retains what he calls the “emo- sales,
electric rickshaws to make a $3,000 car.
tive” design of more upscale vehicles. It is im- tors C
The 49-year-old Mr. Tavares is leading portant that an entry car not be seen as the and se
the charge for Nissan. The intense Portu- “emerging-market car,” Mr. Tavares says, zuki M
guese executive, described by colleagues as but rather something that makes owners feel Nos. 1
last ye
having “gasoline in his veins,” races single- like they have entered the middle class.
seat cars for fun and decorates his sparse ofNissan’s plan to get below $7,000 is con- sold a
fice with framed pictures of race cars. For his troversial, says Ashvin Chotai, head of Asian game o
current mission, he has assigned Nissan engi- auto-industry research at consulting firm ent wa
neers to study Renault’s boxy, basic Logan Global Insight Inc. “Lots of people say the Ghosn
model—produced by the company’s Dacia af- cost structure is just not feasible.” But NisIn 1
NEWS IN
Understand more about business
43
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PM
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44
On a Lighter Note
Dispatch: In Japan, young writers are taking a novel approach
via cellphone
By Yukari Iwatani Kane - 26 September 2007
$50 a month.
NE
W
uniteinhighschool,as sheupdatedit
every day on an Internet site.
In Japan, the cellphone is stirring the nation’s long-staid fiction
market. Young amateur writers in
their teens and 20s who long ago
mastered the art of zapping off
emails and blogs on their cellphones, find it a convenient medium
in which to loose their creative energies and get their stuff onto the Internet. For readers, mostly teenage
girls who use their phones for an increasingly wide range of activities
from writing group diaries to listening to music, the mobile novel, as
the genre is called, is the latest form
site has jumped to more than a million today from about 300,000 before the flat-rate plans cut phone
bills in half. According to industrywide data cited byNTT DoCoMo Inc.,
Japan’s largest cellphone operator,
sales from mobile book and comic
services are expected to more than
double this year, to more than $200
million from about $90 million last
year.
Mobile-novel writers like getting
instant feedback from readers. That
encourages them to keep going or
even to change the story to suit readers. Of course, the close interaction
between reader and writer can
ten stories based on their own experiences will run out of ideas.
But some mobile novelists are determined to not let that happen.
Chaco wants to turn writing into a
career and says she is trying to improve her style.
“I used to write whatever came
to my mind without giving it much
thought,” she says. “But now I think
a lot more about story development
rather than dialogue.”
‘Clearness,’ a romantic tale of a female and male prostitute, is one online novel
that has been turned into a book.
Understand more about business
45
SK. MENPEN R.I. NO: 01/SK/MENPEN/SCJJ/1998 TGL. 4 SEPT 1998
7
In Japan, young writers are taking
a novel approach—via cellphone
M.I.C.A. (P) NO. 226/10/2006
7
KKDN PP 9315/10/2007
Mobile-novel writers like getting instant
feedback from readers. That encourages
them to keep going or even to change the
In “To Love You Again,” Shuhei, a highstory to suit readers. Of course, the close
school boy, ushers his childhood sweetinteraction between reader and writer
heart, Kaori, into an empty science room
can sometimes be too much. A 27-yearfor a moment of privacy before class when
old woman, who wrote a sad love story
someone locks the door. The following
called “What the Angel Gave Me” under
sequence goes like this:
the pen name Chaco, became so popular
In Japan, the cellphone is stirring the
two years ago that she had 25,000 unique
nation’s long-staid fiction market. Young
Kan
visitors a day. But Chaco, who
amateur writers in their teens and
20s
32 W
E DN ES DAY, S EKin
PT E MKon
B E R 2 6,
2 0 07 Kon (soundTof
H E school
WA L L STbell
R E E T J O U R N Aonline
L.
ringing)
won’t disclose her real name, says she also
who long ago mastered the art of zapping
ON OTHER FRONTS
The school bell rang
off emails and blogs on their cellphones,
“Sigh. We’re missing class”
find it a convenient medium in which
/ ByShe
Yukari
Iwatani
said
withKane
an annoyed expression.
to loose their creative energies andDispatch
get
their stuff onto the Internet. For readThe trick is to envision a movie screen
ers, mostly teenage girls who use their
inside your head and translate those imphones for an increasingly wide range of
ages into words, says Ms. Nakamura, the
activities from writing group diaries to
housewife
sore
pinkie.
listening to music, the mobile novel, as
Tokyo
Shewith
said with the
an annoyed
expresbased on their personal experience,
SATOMI Naka- sion.
publishers encourage them to keep
the genre is called, is the latest form of HEN
mura uses her cellThe trick is to envision a movie their real identities a secret.
phone, she has to be screen inside your head and transSome published authors like
Mobile novels started about seven
years
entertainment on the go.
extra careful to take late those images into words, says Yuzuki Muroi, a 37-year-old known
frequent breaks.
That
Ms. Nakamura,
the housewife with for her blunt
essayssite,
on sex, love and
ago
when
the
community-based
Web
is because she isn’t just chatting. the sore pinkie.
single motherhood, scoff at the new
The 22-year-old
homemaker
has re- i-Land,
Mobile novels
startedoffering
about genre.
At an award ceremony for
Maho
began
easy-to-use
Most of these novels are unpolished,
with
cently finished writing a 200-page seven years ago when the commu- prize-winning mobile novelists last
novel titled “To Love You Again”
en- nity-basedWebsite,Mahoi-Land,befeatures
that let users writeyear,Ms.Muroimadeclearherdisapa story with a
simple language and skimpy scene-settirely on her tiny cellphone screen, gan offering easy-to-use features proval. “What is unfortunate is that
usingher rightthumb to tap
thekeys page
that let and
users write
a story with like
a your
mostly a string of
cover
chapters
astories
realarebook.
ting. They are almost always on familand her pinkie to hold the phone cover page and chapters like a real conversation and emotion, and
steady. She got so carriedThe
away last
book. The
trend really
took off
aboutabout
there is three
almost no setting,
scene, or
trend
really
took
off
years
iar themes about love and friendship.
month that she broke a blood vessel three years ago, after phone opera- character development,” she said.
on her right little finger. ago, after
tors began
offeringoperators
high-speed mo- began
A spokeswoman
for Ms. Muroi,
phone
offering
Nonetheless, they are hugely popular,
“PCs might be easier to type on, bile Internet and affordable flat-rate who was one of the judges for the
but I’ve
had a cellphone since
I was in plans for transmitting
That al- contest
year, says she declined
high-speed
mobiledata.
Internet
andlastaffordand publishers are delighted. Book
sales
sixth grade, so it’s easier for me to lowed users to access the Internet as to participate this year.
plans
for
transmitting
data.
use,” says
the soft-spoken able
Ms. Naka-flat-rate
much as they wanted
to for
less than
Still, fans of mobile
novels say
in Japan fell 15% between 1996 and
2006,
mura, who has written eight novels $50 a month.
the best of them are absorbing to
That
users
access
the
Internet
according to the Research Institute
forphone. More than
on her little
2,000 allowed
Maho i-Land,
which to
is now
bus- read.
It isn’t
clear yet how much
readers followed her latest story, tling with six million members, says staying power the genre will have,
as much
they
wanted
to for
lessauthors
than
Publications.
aboutchildhoodsweetheartswhorethe as
number
of mobile
novels on its
or whether
who have writ-
KKDN PP(S) 648/11/2007
The style of many mobile novels is influenced by comic books the young writers
grew up reading. That means lots of dialogue and really short paragraphs, which
fit nicely on a small screen. Huge empty
spaces between sentences can convey that
the characters are deep in thought.
Malaysia: RM4.00, Pakistan: Rs80.00, Philippines: Peso50.00, Singapore: S$3.00(Incl GST), Sri Lanka: Slrs180(Incl VAT), Taiwan: NT$60.00, Thailand: Baht50.00, Vietnam: US$2.50
Maho i-Land, which is now bustling with
six million members, says the number
of mobile novels on its site has jumped
to more than a million today from about
300,000 before the flat-rate plans cut
phone bills in half. According to industrywide data cited by NTT DoCoMo Inc.,
Japan’s largest cellphone operator, sales
from mobile book and comic services are
expected to more than double this year, to
more than $200 million from about $90
million last year.
Australia: A$6.00(Incl GST), Brunei: B$5.00, China: RMB25.00, Hong Kong: HK$15.00, India: Rs80.00, Indonesia: Rp11,000(Incl PPN), Japan: Yen500(Incl JCT), Korea: Won1800,
“PCs might be easier to type on, but
I’ve had a cellphone since I was in sixth
grade, so it’s easier for me to use,” says
the soft-spoken Ms. Nakamura, who has
written eight novels on her little phone.
More than 2,000 readers followed her
latest story, about childhood sweethearts
who reunite in high school, as she updated it every day on an Internet site.
Several of these cellphone novels have
been turned into real books, selling millions of copies and topping the best-seller
lists. One of the biggest successes so far:
“Love Sky,” about a boy with cancer who
breaks up with his girlfriend to spare her
the pain of his death, has sold more than
1.3 million copies and is being made into a
movie due out in November.
., Ltd., 2-1-30 Etchujima Koto-ku, Tokyo 135-0044. Printed in Korea by JoongAng Ilbo. Registration No. SeoulKA00020, Korea Publishing Representative, Song Pil Ho. Printed in Malaysia by Summit Print Sdn. Bhd. (ROC No: 410861-A) No. 2 Lorong SS13/6C, Subang Jaya Industrial Estate, 47500
distributed in Taiwan by The China Post, 8 Fu Shun Street, Taipei 104. Printed in Thailand by Nation Multimedia Group Public Co., Ltd., 1854 Bangna-Trad Road, (K.M. 4.5), Prakanong, Bangkok 10260.
Tokyo–WHEN SATOMI Nakamura uses
her cellphone, she has to be extra careful
to take frequent breaks. That is because
she isn’t just chatting. The 22-year-old
homemaker has recently finished writing
a 200-page novel titled “To Love You
Again” entirely on her tiny cellphone
screen, using her right thumb to tap the
keys and her pinkie to hold the phone
steady. She got so carried away last
month that she broke a blood vessel on
her right little finger.
felt pressured to update her novel and
respond to comments every day to keep
her readers happy.
“I was getting only one to two hours
of sleep a night,” says Chaco, a petite,
neatly dressed woman. Her phone was
ringing with email messages from fans
at 4 a.m. She eventually moved her Web
page off the Maho i-Land’s Web site onto
a private site, where she has more control
over the feedback process.
The novels with the most online readers
also tend to sell well in the bookstores.
Starts Publishing Corp., a small Tokyo
publisher, was one of the first to take
advantage of this genre when a Chaco
fan called up and begged the company to
turn her favorite story into a book. It sold
440,000 copies. Starts and a few other
firms have turned more than two dozen
of the most heavily accessed stories on
Maho i-Land into real books.
To boost sales, publishers have paid
special attention to book design because
some readers buy them as mementos rather than to read. “Clearness,”
a romantic tale of a female and male
prostitute, has a transparent book jacket
overlaid on the cover with the image of
a bed sheet. To preserve the mystique of
the authors and to protect the privacy of
authors who have written stories based
on their personal experience, publishers
encourage them to keep their real identities a secret.
Some published authors like Yuzuki
Muroi, a 37-year-old known for her blunt
essays on sex, love and single motherhood, scoff at the new genre. At an award
ceremony for prize-winning mobile
novelists last year, Ms. Muroi made clear
her disapproval. “What is unfortunate
is that your stories are mostly a string
of conversation and emotion, and there
is almost no setting, scene, or character
development,” she said.
A spokeswoman for Ms. Muroi, who was
one of the judges for the contest last year,
says she declined to participate this year.
Still, fans of mobile novels say the best
of them are absorbing to read. It isn’t
clear yet how much staying power the
genre will have, or whether authors who
have written stories based on their own
experiences will run out of ideas.
But some mobile novelists are determined to not let that happen. Chaco
wants to turn writing into a career and
says she is trying to improve her style.
“I used to write whatever came to my
mind without giving it much thought,”
she says. “But now I think a lot more
about story development rather than
dialogue.”
46
On a Lighter Note
Driving Hummers on Tokyo streets takes a battle plan
By Amy Chozick - 29 October 2007
TOKYO–When Sadayoshi Ishi drives
his Hummer, he takes precautions.
He has installed a navigation system
that shows wide-open streets in green
and more-dangerous narrow streets in
pink on a computerized map inside the
truck. Periscope-like monitors on each
side-view mirror alert him to obstacles.
Mr. Ishi isn’t dodging land mines in
a desert war zone. The 48-year-old
Japanese cartoonist is trying to navigate Tokyo’s urban jungle of streets too
narrow for his 2.1-meter-wide vehicle.
“I broke out in a sweat every time I
drove it,” says Mr. Ishi. He now drives
his Hummer just once a week -- to golf
games -- on a predetermined route.
Mr. Ishi is one of a growing number of
Japanese who are spending more than
$100,000 for the military-style H1
Hummer. Mesmerized by the mammoth
trucks shown in TV news coverage of
the war in Iraq, they are determined to
overcome the special problems of driving in Japan.
The Hummer is the civilian version of
the U.S. military’s High Mobility Multipurpose Wheeled Vehicle, or Humvee, made by A.M. General Corp. The
South Bend, Indiana, company started
selling a limited number of Hummers
to civilians in 1992. In 1999, General
Motors Corp. bought the license to
use the Hummer brand and market the
A.M. General-made Hummer as the
$125,000-plus H1. The civilian H1 is
almost exactly the same as the Humvee,
except for a few added features like air
conditioning and a stereo system, and a
few that are subtracted, such as fittings
for attaching machine guns and grenade
launchers.
The vehicle was trendy in the U.S.,
but as gas prices soared and consumer
tastes shifted to smaller, more fuel-efficient brands, demand waned. Last year,
GM stopped selling the H1 world-wide
and began pushing the more practical
H2 model. Launched in 2002 and also
made by A.M. General, the H2 starts
at $56,000 and has a slimmer body,
smoother ride and more lavish interiors
than the H1. In 2006 GM itself began
manufacturing the H3, a scaled-down
version of the H2 about the size of a
Jeep Cherokee that capitalizes on the
Hummer name and appearance and has
a base price of $30,000.
Last year, car dealers in Japan sold
about 1,400 Hummers, four times the
number sold in 2005 and triple the
number of Ferraris sold in 2006. Some
Japanese -- about 100 last year -- buy
their Hummers directly from dealers in
the U.S.
the right since Japanese drive on the left
side of the road.
The Hummer appeals to drivers who are
“looking for something big and mean
that looks like you’ve got real wheels,”
says Shiro Horie, editor in chief of
American Edge magazine, a new Japanese publication dedicated to American
cars.
It was a rebellious spirit that motivated Iwao Makino to buy a royal blue
H1 Hummer in 2002. He had seen it
on news footage of the war in Iraq and
heard it could wade through 1 1/2 meters
of water and survive a 4 1/2-meter drop
from an airplane. The 33-year-old owner
of a small business that sells computer
systems knew that driving on rough terrain is a common practice among Hummer owners in the U.S. But he found that
off-roading is banned in most parts of
Japan for environmental reasons. “I’m
just waiting for a typhoon or big disaster
to hit Tokyo so I can use my Hummer
to rescue people,” says Mr. Makino. His
biggest thrill now is dodging retailers’
Japan makes up just a small part of
GM’s 52,000 Hummer-brand SUVs sold
last year, but it is a surprising growth
area. American cars have typically not
wowed consumers in Japan, except for a
few niche models like the boat-like Cadillac sedans and classic Corvettes. GM,
the largest U.S. brand here, sold fewer
than 10,000 vehicles last year.
At the Tokyo Motor Show going on now,
GM is showcasing a new Japan-only version of the H3 with the steering wheel on
Understand more about business
47
street signs when driving to the grocery
store and taking his dogs to the park.
While U.S. H1 drivers also have problems squeezing into parking garages and
driving on narrow roads, such problems
are much worse in Japan, where minicars make up a third of the car market.
Passionate owners like Messrs. Makino
and Ishi exchange driving tips at the
Hummer Owners’ Club of Japan, a
support group designed to help H1
owners care for their cars. The club was
co-founded by Tsuyoshi Ishitobi, one
of Japan’s early converts, who bought a
fire-engine red Hummer in 1995.
In the early days, the 51-year-old assistant manager at a technology firm spent
his time measuring the width of the
streets in his neighborhood. Because
there is no place to park his Hummer
at his house and most of the streets in
Tokyo are so narrow, Mr. Ishitobi keeps
his Hummer in a garage an hour-and-ahalf away. He uses a tiny Suzuki miniwagon to get there on weekends.
“My lifestyle completely changed,”
Mr. Ishitobi says. In his spare time, he
48
coaches new drivers who come out to his
suburban garage on how to care for their
Hummers and navigate narrow roads. He
helps them install complex machinery,
such as high-resolution video monitors that instantly display the width of
streets on a GPS screen.
Parking is big concern among H1 owners
because the H1, at around two meters
tall, won’t fit into most Tokyo parking
garages. Shuichi Asai, a 38-year-old
apparel-industry executive, tore up his
wife’s garden to build a carport large
enough to park his beige H1. When his
wife protested, he appeased her by buying her an ocean-blue H1 of her own. He
says she had always liked his Hummer
but never expected such an expensive
gift.
It costs about $115 to fill up the 120-liter
gas tank of an H1 in Japan, compared
with about $90 in the U.S. In addition,
Japan has an environmental law that
requires owners of gas guzzlers like the
H1 to pay a $1,000 tax annually. Another
problem: Since GM stopped selling the
H1 last year, spare parts are hard to find.
Hummer club members order H1 parts
like suspension balls and joints in bulk
from Lynch Hummer in Chesterfield,
Missouri, the largest H1 dealer in the
U.S. Together, the 60 members spend
about $88,000 a year on parts and call
Lynch Hummer almost daily.
As the H2 and H3 models proliferate in
Japan, one looming concern for H1 owners is that their vehicles won’t stand out
as much. Yoshiaki Matsubara, a Hummer club member who owns a restaurant and car museum and wears a hat
decorated with a skull and crossbones,
owns five H1 Hummers and says that
until recently, children ran after the car
and waved to him as he drove by.
“I don’t get as much attention as I used
to,” says the entrepreneur with a sigh.
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49